Can neither see nor upload files

I've upgraded my site from D6 to D7. IMCE worked fine in D6.
I'm using IMCE with FileField Sources for an image field. I've set up IMCE to show a specific directory under sites/default/files, same directory is set up in FileField Sources. When it opens, it doesn't show any files, even though I can see these files in files table in the database. What's missing here?

When I'm trying to upload a file, the upload hangs. The file is actually uploaded to the directory and shows up in IMCE windows, but when I click on it, I get a message "The selected file could not be used because the file does not exist in the database." Opening IMCE again, I don't see this file. Obviously it's never recorded in the database.

I don't see any PHP errors but I've noticed two Javascript errors, not sure if they're related:
Error: $ is undefined
Source File: https://www.nestanet.org/test/file/imce/node/newsletter_corner
/field_imceimage?app=Image%7Curl%40edit-field-imceimage-und-0-imce-path
Line: 49
Error: imce.el("file-count") is null
Source File: https://www.nestanet.org/test/sites/all/modules/imce/js/imce.js?lqsv55
Line: 644