I have the same problem :( I upload the image and while sometimes it uploads it never does the thumbnail. I do have GD2
Environment Check
PHP directive 'safe_mode' (both ok): off
PHP directive 'file_uploads' (need on): on
PHP directive 'register_globals' (both ok): off
PHP directive 'upload_max_filesize': 20M byte
PHP directive 'post_max_size': 8M byte
PHP directive 'open_basedir': /tmp:/usr/share/pear:/home/fhlinux178/m/motorlife.theroadster.net/user
PHP directive 'upload_tmp_dir': ok
Table Check
Photos table: xoops_myalbum_photos ok
Number of Photos: 0
Descriptions table: xoops_myalbum_text ok
Number of Descriptions: 0
Categories table: xoops_myalbum_cat ok
Number of Categories: 3
Votedata table: xoops_myalbum_votedata ok
Number of Votedata: 0
Comments table: xoops_xoopscomments ok
Number of Comments: 0
Config Check
Pipe for images: GD
GD Version: bundled (2.0.28 compatible)
Check that 'GD2'is working correctly under your GD bundled with PHP
If the page linked to from here doesn't display correctly, you should not use your GD in truecolor mode.
Directory for Photos: /home/fhlinux178/m/motorlife.theroadster.net/user/htdocs/uploads/photos ok
Directory for Thumbnails: /home/fhlinux178/m/motorlife.theroadster.net/user/htdocs/uploads/thumbs ok
Photos & Thumbs Link Check
Now, checking .ok
2 garbage files have been removed.