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Rob -
The info you posted from the general info section shows the following:
Image Directory: OK - Can we write to the directory? YES. Current CHMOD: 0755
Thumbnails Directory: OK - Can we write to the directory? YES. Current CHMOD: 0755
Both of those directories need to be at least 0775 in order to upload an image. Open your FTP program, change the permissions on both the images folder and thumbnails folder to 0775, then try to upload an new image. If it fails again, then try changing the permissions to 0777 and attempt to upload a new image.
Just out of curiousity, who is your webhost?
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