I have created a Component with an image using - granite/ui/components/foundation/form/fileupload. When I select a file from the DAM the image is displayed fine, but when I try to upload an image file by clicking on the browse button, no image is displayed in the component. Please help me out.
it is because your component is looking for fileReference property which will have path of the image in DAM but when you upload any image using fileupload component it created file/ file.sftmp node and not filereference property.
there is a workflow which creates renditions at image node itself.
I think you need to overlay the component and try to customize it a bit according to your needs.