Well after spending an entire day trying to figure this out I finally got it, Ill post it just in case anyone else is having this similar issue. Here is how it started and the solution; I was running Ubuntu 9.10, Karmic Koala and had the current version of ImageMagick installed and it worked fine, I then had to update my ImageMagick to the latest version by running;
sudo apt-get install imagemagick
that is when i was no longer able to upload jpg via paperclip on my ruby on rails app. The solution is to go get the latest ImageMagick version and build it yourself;
wget ftp://ftp.imagemagick.org/pub/ImageMagick/ImageMagick.tar.gz
tar xvfz ImageMagick.tar.gz
cd ImageMagick-*
./configure --disable-shared
make
sudo make install
Also after you run the command ./configure --disable-shared
, look at the last 50 lines and make sure you see;
JPEG v1 --with-jpeg=yes yes
JPEG-2000 --with-jp2=yes yes
If it says no then you need to install libjpeg62
and possibly libjpeg62-dev. That worked for me, hope it helps others.