In the BoystoMenAZ.org subsite that I just migrated to WPMU, the media images show up fine on the public side, but are not showing up in the media library. Just get a lot of gray default images.
I have checked to make sure file permissions are all 755. Also tried the Regenerate Thumbnails plugin, but to to avail. Not sure what to do next. I have migrated several sites to this WPMU network, and haven't had this problem before. I'll give you access so you can dig into this.