Are you using gd through php?
If so, what's your output from the phpinfo() command in the gd section?
Code:
gd
GD Support: enabled
GD Version: bundled (2.0.15 compatible)
FreeType Support: enabled
FreeType Linkage: with freetype
GIF Read Support: enabled
JPG Support: enabled
PNG Support: enabled
WBMP Support: enabled
XBM Support: enabled