Upload path directory separators may be to blame
Running EE 2.5.2 on Windows. Uploading an image fails with this message:
"Thumbnail could not be created for the image. Please make sure the thumbnail directory is writable."
The odd thing about this message is that you won't get it when upoloading very small files - probably because EE doesn't need to make a thumbnail of them. However for bigger files you'll get this error message.
FIRSTLY - Make sure all directory permissions are set correctly, then, if you still get the error check your directory separators.
Navigate to Content -> Files -> File Upload Preferences and edit the File Upload Preference which is causing the touble.
If the directory separators on "Server Path to Upload Directory" are set to / (forward slash) and not \ (back slash) change them to \ (forward slash) and save.