I know that's odd (still in Joomla 3.5.0).
In the function canUpload($file, $component = 'com_media')
of class JHelperMedia, this is within /libraries/cms/helper/media.php
a check for serveral tags searches through the whole uploaded file(s).
So if there is e.g. a tag ol like "<ol " or "<ol>"
inside the raw picture file (case insensitive), the Error Possible IE XSS Attack found is shown.
- it checks for 116 strings: 'abbr', 'acronym', 'address', 'applet', 'area', 'audioscope', 'base', 'basefont', 'bdo', 'bgsound', 'big', 'blackface', 'blink', 'blockquote', 'body', 'bq', 'br', 'button', 'caption', 'center', 'cite', 'code', 'col', 'colgroup', 'comment', 'custom', 'dd', 'del', 'dfn', 'dir', 'div', 'dl', 'dt', 'em', 'embed', 'fieldset', 'fn', 'font', 'form', 'frame', 'frameset', 'h1', 'h2', 'h3', 'h4', 'h5', 'h6', 'head', 'hr', 'html', 'iframe', 'ilayer', 'img', 'input', 'ins', 'isindex', 'keygen', 'kbd', 'label', 'layer', 'legend', 'li', 'limittext', 'link', 'listing', 'map', 'marquee', 'menu', 'meta', 'multicol', 'nobr', 'noembed', 'noframes', 'noscript', 'nosmartquotes', 'object', 'ol', 'optgroup', 'option', 'param', 'plaintext', 'pre', 'rt', 'ruby', 's', 'samp', 'script', 'select', 'server', 'shadow', 'sidebar', 'small', 'spacer', 'span', 'strike', 'strong', 'style', 'sub', 'sup', 'table', 'tbody', 'td', 'textarea', 'tfoot', 'th', 'thead', 'title', 'tr', 'tt', 'ul', 'var', 'wbr', 'xml', 'xmp', '!DOCTYPE', '!--'
So you can reckon yourself how likely it is that a random hit exists!
Especially with bigger images, and also with the one letter "s" or "S";
A remedy: You can use a tool for manipulating the image, e.g. the website tinypng.com where you can also make smart compression for PNG and JPG images.
This will create a new binary for your image, and hopefully takes the upload.
There is also a functionality in Joomla - a class for Uploading files, which also uses special checking. This is the cause, that I can't use this file handling class JFile with that static function upload(). This class would be very comfortable in usage, but: The JFilterInput::isSafeFile is called, and when uploading a file e.g. 20 MB, its nearly every zip-file causing an error! Within that check, suspicious strings inside the raw zip-file i.e. "inc","phps","class","php3","php4","txt","dat","tpl", and "tmpl" cause a break and returns false for uploading.