i should mention i am running snow leopard server (10.6.7)

I wish I had a solution for you, but I don't. I had the same exact thing happen to me - transferred my site to a new location (same server, same specs) and then all of a sudden the thumbnails in the file manager weren't working, had some problems uploading new files, and my captcha stopped working. So you're not alone. I spent days trying to resolve it, I even paid for Concrete5 support to look at it and they were unable to solve the CAPTCHA issue. In the end, I ended up deleting everything and copying everything over again from the original source and magically it all worked. Elegant, I know. Hang in there.

It's possible that there's a permissions issue on the server. Unfortunately this isn't easy to fix without logging into the server command line via SSH (even then it's not easy unless you've done it a thousand times already).
An easier solution that might or might not work is connecting to the server via FTP, navigating to the site's directory, set full permissions ("777" or "check every box") on the "files" directory and "apply changes to subdirectories"... and then wait for a long time while it does its thing. Not sure what the specific commands are though because it depends on which FTP program you're using.