I have python 2.7 and it seems to be the problem with it. Just formated the partition I had linux and fresh install everything and still have same problem.  I did what is recommended here too.

Check your Python version

Galaxy's core functionality is compatible with Python versions 2.5, 2.6, and 2.7. (Version 2.4 support was last included in the November 18, 2011 Distribution). Before reporting bugs, please ensure that python --version reports one of these three versions. If this is not the case, a simple solution is to manipulate your shell's $PATH variable to place the correct version first. This can be done for only Python by creating a new directory at the front of $PATH and creating a symbolic link to python in that directory:

Toggle line numbers 
   1 % mkdir ~/galaxy-python
   2 % ln -s /path/to/python2.5 ~/galaxy-python/python
   3 % export PATH=~/galaxy-python:$PATH




On Sat, Feb 25, 2012 at 5:50 PM, Luciano Cosme <cosme.simple@gmail.com> wrote:
Hi Everyone,
   I have been running a Local Galaxy instance for a long time, but now I am having some problems with uploading data. I am getting the following error:
Can't create peek [Errno 2] No such file or directory: '/home/koala2/galaxy-dist/database/files/000/dataset_13.dat'



and from the Terminal:
127.0.0.1 - - [25/Feb/2012:17:45:00 -0500] "POST /library_common/library_item_updates HTTP/1.1" 200 - "http://127.0.0.1:8080/library_common/browse_library?


sort=name&operation=browse&f-description=All&f-name=All&f-deleted=False&cntrller=library_admin&async=false&show_item_checkboxes=false&webapp=


galaxy&id=f2db41e1fa331b3e&page=1" "Mozilla/5.0 (X11; Ubuntu; Linux x86_64; rv:10.0.2) Gecko/20100101 Firefox/10.0.2"



 
   I reinstalled Unbutu and still having the same issue. I also removed Postgresql 9.1 and reinstalled it. I that it might be an issue with postgresql and not Galaxy, but I am not an expert.
   Any suggestions will be appreciated.


Thank you.

Luciano