I just took a look at this for you since I still had your support ticket from the other day open. It looks like there was a small bug that can occur with category images when you're running in safe mode, which I have gone ahead and fixed for you. If you browse the categories again and set the category images it should work without a problem.
For anyone else that's having this problem, please look in your forum/includes/functions_gallery.php file for this code:
Code:
Content visible to verified customers only.
Replace with this:
Code:
Content visible to verified customers only.
And that should take care of the problem.