I'm not sure what to do now... I've found something like this upload_tmp_dir= "C:\WINDOWS\Temp" along with other extensions in php.ini and there is also this
; Whether to allow HTTP file uploads.
file_uploads = On
; Temporary directory for HTTP uploaded files (will use system default if not
; Maximum allowed size for uploaded files.
upload_max_filesize = 2M
This is all that contains the word 'upload' in php.ini
I'm attaching it also here..
ps: there are no more thumbs created inside the gallery folder. just the pic itself, and it shows red cross instead of a thumb.