I’m having the same problem as robertdrake and devilsavocado (above).
I add an image from the media library and initially the image appears in the widget interface. As soon as I hit ‘save’, however, the image disappears from the widget interface.
On the front end of the site, the image alt text and caption appear in the sidebar, but a quick look at the source code shows that the widget is displaying the URL of the containing folder (wp-content/uploads/2010/05/) as opposed to the image URL (wp-content/uploads/2010/05/imagename.jpg)
I’m using the latest version of the widget (3.1.5 at time of testing) as well as the latest version of WordPress (3.0 beta). I’m aware that 3.0 beta may not be officially supported, but others appear to be having the same problem with earlier versions.
I’ve tried uninstalling and reinstalling the plugin, as well as deactivating all other plugins. All to no avail. Any idea of how to fix this, as the widget seems ideal for my needs?