Take a look at Brian Farnhills' blog's latest entry. He has just found that the infrastructure update released last month kills some functionality in picture libraries.
I wonder if that was intended.http://pointstoshare.spaces.live.com/Blog/cns!AEC42F315B4528B0!2974.entry Update - I have opened a support request with Microsoft, and waiting for their response. Update - answer from Microsoft PSS - "known issue". They are checking to see if there is anyone working on a hot fix. By the way - Brian is presenting at today's Canberra SharePoint User Group meeting about site definitions. Should be interesting!