Field image, uploading problem

I think r1209 (1.5.6RC4) was setting permissions to 0777 to account for bad server configuration, but this is not secure , and we changed it

Please check these:
1. Are the files owned by correct user?
2. Do you use FTP layer, avoid it , and instead make sure your server is using PHPSUEXEC

If yes have checked the above, then please test with this updated image.php plugin file:
[attachment=0:170v5kvm]<!-- ia0 -->image.zip<!-- ia0 -->[/attachment:170v5kvm]

1. Replace image.php file (v2.0.0+)
2. Make sure top image folder of yours (and the folders above it) have good permissions (the one configured in image field configuration e.g. images/flexicontent)
3. Change in the field configuration the thumbnail height e.g. add at least 2 pixels
4. view items in frontend (not in item form)

Do the image thumbnails appear?