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I’m having the same issue with NextGen gallery: it won’t generate thumbnails. When I upload images, few 4-5 thumb created others reports the following error:

ID 5017: A failure occurred
[more]
[object XMLHttpRequest]

All images are: 1024×768

me too

Now it’s working. Tnx Alex.

I have this problem too. I disabled all of my plugins and still can’t get it to work.
I have 450 galleries. Is it too much?
Any other suggestions?