thanks for the advice i followed the steps you suggested but this did not fix the issue. I changed the theme back to Twentyten and the insert / upload icon work fine so it looks like the theme is not compatible with the 3.1.2 update.
I found a comment on a WP troubleshooting site which I think is a key to sorting the problem it states as follows:
”Today while setting up a wordpress site I ran into an issue with the insert / upload icon not opening in the light window and was having trouble uploading images. After a few hours of trawling the web for an answer getting lost in support docs I noticed in firebug that the wordpress console was having trouble with jQuery saying it was undefined. To fix the problem I downloaded the latest JQuery overrode the version bundled with wordpress, cleared the cache and refreshed and I was back in business. So the moral of the story is if you are having trouble with the wordpress console not behaving correctly update the jQuery file”.
QU. 1 Where do I get the latest jQuery file from and what would the file be called as I find many jQuiry files?
Qu. 2 how do I locate the version in the WP bundle so I can update it?
Qu. 3 any other suggestions if you have had a similar problem?