Hi Halldor,
We have very limited support options if you use localhost.
It looks like you have a PHP module missing. Have you looked at your webserver logs? There should be a PHP error in there saying what it is looking. Maybe in php.ini MAX_FILE_SIZE value is missing.
- Try to upload those 3 type of image files: jpg, png and gif file!
- Try to upload small image (png and jpg), 500Kb max.
Do not use .JPG - filenames with small letters only for testing.
If you can upload .png file but not .jpg means server configuration problems!
Search also in localhost software documenation/forum what should be enabled in php.ini