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- Your server does not support the GD graphics module. In that case you will not be able to use GD for image resizing, so you need to disable that parameter in the admin.
- The file permissions are incorrect on the script which resizes the image thumbnails. This script is called resize.php and is in the component assets folder. Usually this script will run with permissions set to 644. Occasionally, depending on your PHP configuration, this may need to be set to 755.