hi dcamuinfix,

Thanks for sharing your solutions. I am having this problem as well. I tried your way and it works. This is just some additional steps for adding new product images.

Everytime when we add new product image, we have to set the system to "Private", once added, load the product page and click on the image. After that, we have to turn it back to "Public" again, or else, the image will be loading as a binary and funny characters will be shown.

I also don't know why? I hope this is gonna be an installation problem. I will be installing Drupal and Ubercart fresh again soon. Hope this will resolve the problem.