OK.
What I have discovered after much stress, is that 1and1’s server (whether it is the php, the gd-lib or the memory limit…or even a combination of any of them) cannot handle larger images. The images I uploaded were 2592X1944 at 180ppi with a file size range between 1.2mb to 1.6mb.
When uploading those pics I received this error when it tried to generate thumbnail:
Fatal error: Out of memory (allocated 32505856) (tried to allocate 10368 bytes) in /homepages/28/********/htdocs/demo1/wp-content/plugins/nextgen-gallery/lib/gd.thumbnail.inc.php on line 183
What I did after trying .htaccess trix and calling 1and1 support (which was helpful, but not) and a few other tips, was simply reduce the size of the file I uploaded. I reduced the same image to 1024X768 at 72ppi which ended up weighing in at 180kb – uploaded it (had to scan folder for it after uploading – nuisance for another thread) and once detected it generated a thumbnail with absolutely no problem.
One of the issues I believe is that 1and1 limits the php memory usage no matter what it says you have access to, and therefore has trouble ‘digesting’ larger images.
While not an ideal thing, I hope this will help someone workaround the issue. Maybe if enough 1and1 customers complain we can get them to resolve this issue, after all…we are the customers!!!