Do you have a custom path to the manager? Looks to me its or host related, or related to your browser? What do you use? On a Mac (old powerpc) with Firefox it doesn't work either here but thats a really old one and can't be updated.
Yes, custom path. It was an older htaccess rule that caused the problem. Firefox on a PC - now wroking fine. Thanks for the followup and help fourroses666.
Turned out to be an .htaccess rule blocking any request with '=http:' in it.
Thanks so much Susan.
I had an older rule in my htaccess file (carried over from 1.0.10 or earlier) - once I updated that rule to match the rule in the htaccess file in the 1.0.12 package per Susan's instruction, I could successfully insert an image in the RTE as per normal.
Hooray!
#exclude /assets and /manager directories and images from rewrite rules
RewriteRule ^(manager|assets|js|css|images|img)/.*$ - [L]
RewriteRule \.(jpg|jpeg|png|gif|ico)$ - [L]
Once I changed to the rule above, I was still able to use the original rule that was blocking any request with '=http:' in it.
Thanks for all your help.