I’m having the exact same issue. And my problem manifests itself differently depending on the account. For instance, the Admin account works fine, a second account throws the error you describe, and a third account throws no errors, but freezes at the same point (when clicking the “insert into image” button).
All of these accounts are being tested on my workstation under both IE7 and FireFox3. I’ve tried everything in the support post above but nothing works.
Frustrating because we can’t roll this out until this is fixed, yet I see posts going back 6 months on this same issue with no resolution.