uploaded images "file not found"

I’m having problems uploading images to my www.ads-software.com site. When I use the “add media” section it goes through the process of adding the image and creates a file in the Media Library but instead of showing the image there is only a blue question mark and no image. If I try to download the file, it says “file not found”.

I tried uploading the images manually through my host (Cirtex) and that works just fine, but that is a big hassle.

Any suggestions? The wp-content permissions are 755.

Thanks!
Tanya