Hertz, same here. .jpg image (well a number of them!) all around 200 KB. I originally tried posting images just under 2MB which didn't work. I resized to 200 KB and still no dice. This was on a Mac laptop. I'll go home and try again on the desktop PC to see if that works. If it does, it might be a platform issue!
Edit: Tried Safari, Chrome and Firefox on the Mac and all had the same result. Sending Request and Waiting Messages appear but at the end the loader box goes blank and remains on screen and no image is loaded into the post.