Media uploader not work properly

I am uploading media via the WordPress media uploader. It says it uploads the file fine (and if I check inside my uploads folder, it is in fact there).

But the image is broken on the frontend, and if I go to the media uploader, it shows a broken image.

Now the strange thing, is if I click ‘edit image’ in the media uploader, it shows me the image…

the link to the image is also correct except when I use that link to view the image I am taken to a 404 page.

I would like to add that I de-activated all the plugins I am using and there is no change. As well, I’ve given the uploads folder permissions of 777. No change.

The uploader works fine on my remote server, but this happens when I use the site locally (using MAMP).

I just want to know what the problem is and if it is something that will occur when I set the site live on another server…What is going on?

Any help is appreciated!