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The browser uploader also has problems. My wife reported that whenever she tried to upload a photo to her blog, it would freeze up on the "Insert into post" step. In other words, you browse, upload, add the meta info for the image, choose what kind of link you want, then hit the "Insert into post" button and it dies. You're left with a white screen and nothing inserted in your post. She searched on the web and found lots of people reporting the problem, but no fixes.
So we started the debugging process - transfer her exact install to localhost and start hacking. Hmmm. Worked first try. Uh oh. That means debugging on the live site.
So over on the live site I noticed she had multiple users in the Adminstrator group. Not the greatest for security, but I wondered... So I tried it with user #1, the administrator created at install time and it worked. I tried it with her default profile, and it didn't work. We took the default profile and downgraded it to Editor and lo and behold, it worked.
So it would seem that though WP lets you add more users to the Administrator group, it really wants you to have just the one user with the super long, super secure (right?) password and hopefully a somewhat obfuscated user name (right?) as well. Then for the day to day blogging, if you try to give a second user Administrator privileges, it creates at least this one problem, perhaps others.
So there's a workaround, but it's not really a workaround in the sense that ideally you want a "posting user" and an "admin user" on your wordpress site anyway. So the anticipated behavior works, but if you try to give two users Administrator privs, it does not.
This is a bug in WP, but since this solution works, I stopped there in my debugging and never got to the cause. But at least there's a fix.