Hi Rod - it seems unlikely that the 3.5.4 update would cause a change in behavior like this. Can you tell me which version you were using before? I can provide a direct download link to check if the older version indeed works while the newer one fails.
It seems more likely to me that something changed on the server or that something specific about the content of this post is throwing off your blog server to make it fail while trying to publish the post. If you try to post a new, trivial post with e.g. just content "Testing", then does the new post publishing work?
It's OK now. It looks like the server where my site and blog reside must have gone down just before I tried to post. Things appear to be normal again now and ME posts OK. It's just disconcerting when I do an update and all of a sudden something doesn't work! One assumes that the change one just made is the cause, but in this case it was apparently coincidental and unrelated.