The root of the problem lies in faulty permissions within the iPhoto Library. The solution is to fix the permissions. Repairing permissions in Disk Utility won't help because that doesn't affect user files, only installed programs with Receipts.
While awaiting an official fix or advice from Apple, I have posted an easy, safe fix on my web site.
[crarko adds: Note: Apple has since released an update to fix this.]
Here is my solution. If you have already lost data you will have to restore from Time Machine or whichever backup scheme you use.
- I first downloaded BatChmod, this is an excellent free utility.
- Install BatChmod and run it. [crarko adds: You should be able to view/set the permissions using the Finder, too.]
- Drag and Drop your iPhoto Library (usually located in your ~/Pictures folder) into the open BatChmod window.
- Change the Letters R, W and X under the Owner, Group and Everyone to a check mark.
- Also select the check mark for the following boxes: Change ownership and privileges, Clear ACLs, unlock box and Apply to enclosed folders and files.
- Click Apply.
[crarko adds: There do seem to be a number of reports of this issue. Be sure to have a current backup of your photo library prior to upgrading, as you should have a good data backup prior to any major software upgrade.
I upgraded to iPhoto 11 with no problems, but I did check my photo library and the permissions were already set as described in the hint.
I am also a big fan of BatChmod; there was a long time when it could be used to fix permissions when the Finder had problems doing so, especially recursive permissions. Finder in Snow Leopard has caught up, in my experience.]

