If its not your plugins, then Its probably your theme. Deactivate the theme, and use any other standard theme like 2010 or whatever comes with the install and then try. If it works, then you need to see if the theme you are using has an update for the latest wp version.
I also found a temp fix that I have used when I don't have time to troubleshoot if if a theme has been customized and can't be updated. This plugin changes the basic wordpress editor and allows you to switch back and forth between visual and html. However it doesn't fix the media issue. Plugin: Dean's FCKEditor For Wordpress