Experiencing the same strange issues – 1&1 Hosting, WP 2.7.1, current ngg. Same config as the guys above.
Is it possible that this issue somehow correlates to the “HTTP Error” of the common WP (Flash) Uploader (e.g. discussed here https://www.chewie.co.uk/general/wordpress-image-upload-http-error/)?! Does ngg hook on the WP-integrated routines to rework media-files?
Regarding the WP http error: none of the fixes workes for me.
Other question: Are you guys all using Macs?! Or does it occur on Windows too?
I’d loooove to have those thumbnails working…