Make sure your folders are writable.
Also make sure the paths in "Tools/Configuration/Interface & Features AND File Manager" are correct. I personally do not know how to check if they are correct but you could try a new install and figure it out.
Path names seem to be correct, If I do a new install in an attempt to correct this problem, will my content stay intact?
Keith
Make sure that the "image" folder has the write permission.
I would suggest you try a new install in a new folder "web2". If you want to install over the current install make a backup first