I have another theory after realizing that my admin user does not have the problem but another user with different privileges was having the problem.
Most of the images and other changes that were previously successfully submitted were performed by the admin. But more recently I was using a different user with less privileges.
I have the plug-in User Role Editor installed, and the user that was having the problem has a role based on Editor, but did not have the permission Manage Options checked.
I tested by using two different computers to test: 1) one logged in as Administrator role to change permissions, 2) another logged in with Editor role to submit changes. I have able to successfully create or fix the problem by simply unchecking or checking the Manage Options permission in the User Role Editor.
So at least my version of the problem can be fixed by checking the Manage Options permission for the role where you are having the problem.
I am using: WP 3.5.1 User Role Editor 3.10 (and some other plug-ins).
I would be interested in your thoughts on the above observations, and whether adding the above User Role Editor plug-in, and manipulating the Manage Options permission is the real cause/fix.