This was driving me crazy. I upgraded to 3.4.1 of WordPress and now when I create blog posts, I can’t insert images!
I figured it out. If you have this problem, try deactivating your WordPress plugins until you find the one at fault. In my case, the Disqus plugin was causing issues. There are more tips on fixing this issue at the WordPress support page.
I do have the same problem… but there isnt any plugin loaded nor activated.
Maybe your theme is having a effect? Try a different one. You can check out the support page link above for other things to try as well.
WordPress 3.4.1 is a raging grease fire, and is the only version ever which I’ve had to revert from due to the massive number of things that it broke.