The Force Regenerate Thumbnails plugin did not work. I have downloaded a fresh copy of wordpress, created a new DB, changed all permissions even to 777, chown on my host to include my ftp owner as the owner of both the wp-config and uploads folder, as well as the months within it, changed (from settings > media) to not divide uploads into date folders, modified (extensively) php.ini, wp-config.php etc etc etc for weeks now.
Nothing helps. I am surprised that with the increasing posts around the internet in the last few days alone, let alone in the past months, that WP has not addressed this officially.
This also happens on my local server on both windows running XAMPP and OS X with MAMP Pro.
The ONLY client sites where this does not happen is wp 4.05 and prior!!!! very very angry. This should be able to work out-of-the-box without us developers having to try and troubleshoot this issue or use plug-ins by third party developers. I have been trying to fix this for weeks for many of my clients, and to no avail. I am losing business and time and money, as many of images required to be uploaded by my clients I have to do myself via FTP, and either provide the clients with the URL or use that URL somewhere in post etc. This is a very messy process which basically voids the point of having WordPress really. Huge disappointment after years of having solely dedicated to WordPress, and now Joomla is seeming as a better option in one client project – which I never thought i would resort to!!!