Here's an update.
There's an error in the way the new WordPress image uploader is writing the title tags. It's placing these in the wrong part of the image code string.
The result is that although the uploader will code a title tag ('description') when you insert your image into your post, it strips this out as soon as you save the post. In consequence, no hover text will be displayed.
It's a bug, but until that's fixed you can go back and fix it manually in the HTML editor. Here's how you do it:
It seems to me that it would be really useful to institute a WordPress.com 'Status' page showing current issues and progress towards fixing them.
Clearly there's been a lot of work going on behind the scenes over the past four weeks since the upgrade on 4th April, and that's all very much appreciated.
Nevertheless, providing more information about what is going on would be a very positive step towards customer relations and would help these forums to work more effectively for everyone.
Anyway, just one suggestion for improving WordPress and making life easier for staff and users alike. In the meantime, I hope this fix is useful for anyone who needs it.
All kind regards from London, and happy blogging.