I have this same issue, and have had for some time.
On creating a new ad, then adding a 125×125 image, the image field is still blank.
My work-around is that I have to find the URL to the image and insert it into the ad manually. Very time-consuming and tedious.
@rmx101 – you posted this issue 7 months ago but haven’t had a reply – have you fixed the problem? If so, can you please tell me how?
Thanks