Index: src/wp-admin/includes/schema.php
===================================================================
--- src/wp-admin/includes/schema.php	(revision 31560)
+++ src/wp-admin/includes/schema.php	(working copy)
@@ -461,7 +461,7 @@
 	// 2.7
 	'large_size_w' => 1024,
 	'large_size_h' => 1024,
-	'image_default_link_type' => 'file',
+	'image_default_link_type' => 'none',
 	'image_default_size' => '',
 	'image_default_align' => '',
 	'close_comments_for_old_posts' => 0,
Index: src/wp-includes/media-template.php
===================================================================
--- src/wp-includes/media-template.php	(revision 31560)
+++ src/wp-includes/media-template.php	(working copy)
@@ -643,7 +643,7 @@
 					<# } #>>
 
 				<# if ( data.model.canEmbed ) { #>
-					<option value="embed" selected>
+					<option value="embed">
 						<?php esc_attr_e('Embed Media Player'); ?>
 					</option>
 					<option value="file">
@@ -667,7 +667,7 @@
 					<option value="custom">
 						<?php esc_attr_e('Custom URL'); ?>
 					</option>
-					<option value="none">
+					<option value="none" selected>
 						<?php esc_attr_e('None'); ?>
 					</option>
 				<# } #>