I am having this exact problem: http://drupal.stackexchange.com/questions/19152/drupal-7-fails-to-create...
When I add an image to a content instance, I get the original uploaded as expected. However, the others (thumbnail, medium and large): do not get created. The directory is readable and writeable so there should be no issue permissions wise.
Every person I found that managed to resolve this issue did it through nginx configuration or file permissions. I am almost 100% certain I am not using nginx despite not knowing what it is. I am also 100% sure my file permissions are set correctly.
When configuring image styles the sample image fails to load. When I try to load the image in my browser I get a forbidden message (obviously a permission issue). However, I have set and reset my permissions numerous times and they reflect that.
When I upload new images they upload to the correct folder. However, any image style based off that image is not created. That includes thumbnails, large, medium, or custom styles.
I apologize if this post is convoluted but I have spent ALL DAY trying to solve this issue with no luck.