In the web.config file, I found the following line:

<add name="LinkClickHandler" path="LinkClick.aspx" verb="*" type="DotNetNuke.Services.FileSystem.FileServerHandler, DotNetNuke" preCondition="integratedMode,runtimeVersionv2.0" />

I changed it to:

<add name="LinkClickHandler" path="LinkClick.aspx" verb="*" type="DotNetNuke.Services.FileSystem.FileServerHandler, DotNetNuke" preCondition="integratedMode" />

and now it works. I switched it back and hit refresh and the image did not display.

So ",runtimeVersionv2.0" is causing the problem.

Well... yes, it's fixed. But, I had to edit the web.config to do it. But will that fix cause other issues? What does runtimeVersionv2.0 do?

When I upgraded to DNN 6.0.1, I edited the release.config and only changed the connection string and machine key lines and saved it as web.config. I did not edit the LinkClick handler or anything else. I would think that the shipping version of DNN should work without tinkering with the web.config as I just had to do. Actually, come to think of it, I had to edit the web.config during the upgrade and manually update newVersion="2011.1.519.35" for Telerik.Web.UI, which wouldn't load.