Yay! After hours of trying and searching and trying ... I STILL don't know the answer but I did get it fixed.
My two sites that use WordPress are ClearlyChosen and ClearyHelena and it was massively daunting not to be able to upload images.
Finally I turned to my host provides Exabytes (who have THE BEST customer service around - 24/7!) and they fixed the HTTP Error Wordpress Image upload problem.
This is what they said was the problem:
So if you have the same problem, your hosting provider might be the way the go.
I currently have WordPress ver 3.3.1 installed.
p/s I tried all the .htacces suggested solution (scary!) .. to no avail. So speak to your hosting providers - hope they are as good as Exabytes! (nope - I am not one of their affiliates ... those that is definitely looking more attractive all the time. Can't beat their customer service!!!)
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