I must have spent two hours troubleshooting this issue with the Really Simple Captcha plugin today. I am using it with Gravity Forms, and the captcha image was not displaying at all – I was getting a broken image.
The solution was to create a folder in “wp-content”->”uploads”->”gravity_forms” called, “captcha” (see image below). Once I did that everything worked properly!
I hope this blog post saves you some time!