History:
Followed lynda.com custom theme tutorial which unfortunately didn't include necessary code for the new media library features.

Issues:

1. Uploading files to the library pauses in "crunching mode" and doesn't resolve. It doesn't create thumbs, med and large versions of images. When you click on library later the original images at it's originial size appears, but you cannot use unless you use the url directly for the image.
2. Using page/post add image insert feature doesn't work. You get an endless searching circle and the library isn't visible. You cannot use the gallery feature either. You can only insert from URL.