While creating the previous post, I was happily updating the diagram in the post and fine tuning it, when all of a sudden the diagram would no longer load, giving the HTTP Error. I tried different formats (jpg, png, bmp) , renaming it etc, and a whole bunch of things I found on the web. In the end I became pretty certain it was the diagrams contents that were causing difficulties and started removing items until it worked. In the end I realised that the issue was the width of the document in pixels. It was a full A4 landscape page. I grabbed all the contents and reduced the size a bit to about 3/4 of a page, and it loaded fine.
There is obviously a maximum width of a media file and I had exceeded it. Way to go with meaningful error messages WordPress!