Okay, I'm on a PPC Mac running Panther. I have the latest versions of Firefox and Camino, and the latest version of Safari that Apple will let me download. I cannot replicate these issues - I was able to upload a picture with each browser. But I do have some advice:
* Don't use Safari. It's broken, not just with WordPress.com but with Blogger, Writely and a bunch of other webapps.
* When I was testing this, sometimes I was able to upload a picture but after the upload the little file browser would disappear. In some instances I could force reload (usually cmd-shift-r) and the browser would come back. In other cases, after such a reload, the browser would not reapper, but I would have no problem uploading a picture on the second attempt.
* Don't forget that you can always input the url of the image directly. So if you have a picture hosted on Flickr, click on your picture then select the "All sizes" button above the picture. That will take you to a page that will have your pictures static url. Then, from within WordPress.com, you can just click on the insert image icon and paste the image's url into the form.
* Finally, if all else fails, go download Qumana, the free blog editor. I just tested it and was able to upload pictures from my hard drive to a WordPress.com post from within Qumana. The only problem I had was getting the time settings from Qumana synched with WP.com, which you'll just have to mess with. If you make a post from Qumana but it doesn't appear on your blog, go to Manage > Posts and see if it appears there. If it does, view it to make sure the picture got uploaded. If it did, then all you have to do is get the time settings right, and you can blog with Qumana from now on.
* Alternatively, if you feel like spending a little money, I know that ecto is capable of uploading pictures to WordPress.com as well.