This issue arrived for me with the installation of WP 3.0. I tried all of Shane G’s suggestions with no resolution.
The issue is with jpg’s, other formats work ok. Images are small – 32K range. Problem occurs with both the Browser and the Flash uploader. Even with the errors, a check of the media library indicates that the images uploaded ok and they can be used in posts.
When upload via “Add an Image” from within the post editor, the error list is followed by the regular options to edit the file name and other data.
When timthumb tries to resize the same images, it reports the file “is not a valid JPEG file.”
Does anyone have a clue as to how to really resolve this issue??