If it helps, i can post the exact error message i get when I try to upload a picture. It uploads the 'shell' and it shows a placeholder, but the 'guts' of the picture is missing.
It doesn't help if I change format to .png vs .jpg or .jpeg
3rd party hosted pictures work.

We probably should stop the attachment manager completely if possible since all the pictures being uploaded since this is broken may never get fixed since the actual pixel data seems to be missing.