When a user (teacher, course creator for this example) uploads an image as part of editing lesson content, the image remains inaccessible to any other user except the user that uploaded the image.

Specifically, the images in the lesson content are being returned using draftfile.php which can only return files for the uploading user (or admin, apparently). Shouldn't the images be displayed using file.php or pluginfile.php?

If you look at uploaderview.png, you can see what the user uploading the image sees.
If you look at studentview.png, you can see what every other user sees (student in this case).

The source of the image is http://zohamoodle.vhost/draftfile.php?file=%2F170%2Fuser%2Fdraft%2F92193502%2Fkitty.jpg, which as I mentioned before, can only work for the user who uploaded the image.

http://moodle.org/mod/forum/discuss.php?d=165822
http://moodle.org/mod/forum/discuss.php?d=165467

It should be noted that the instances of Moodle 2.0.x tested were upgraded from Moodle 1.9