I know this is fairly old, but I just installed 2.6 and ran into the same issue. The Flash uploader gets to “Crunching” and then throws an HTTP Error. The browser uploader hangs for a minute and then throws a 500 Internal Server Error. In both cases the image actually is uploaded and I can find it in my gallery. However, as others have said, it does not generate a thumbnail. (I’m with 1&1 for my web host, if that’s of interest to anyone). This is a brand-new, clean installation on a website that has never had a WordPress installation.
I thought I’d mention that number 7 on this page worked for me: https://www.ads-software.com/support/topic/164999. It seems the issue is with image size (not file size). My camera takes pictures at a resolution of 3072×2304. For reference, all of the images I’ve tried uploading are full color. I’ve noticed that if I scale the images down to 25% their original size (768×576), both uploaders work just fine and a thumbnail is generated. I tried reducing by 50% at first to 1536×1152 but that was still too big it seems. While this “solution” worked for me, it really seems more like a work-around. A friend of mine is on an older version and she has no trouble at all uploading large image files. Just thought I’d throw in my observations in case anyone’s still having this issue.