Sooo..... after three weeks of head scratching.
After reinstalling gd, image magic, installing a brand new version of photopost to test image uploads I found the cause of the problem.
Turns out that the problem was caused by a missing row in the 'settings' table - row id 88 - that sets jpeg image quality. I added the row with the default setting at 70%, then made sure that the permissions were open up to 777 on the uploads and data directories and hey presto! - works. The thumbnails and other images are no longer distorted.
Gifs uploaded fine which should have given me a clue but I didn't even know a jpg image quality database row existed until I compared the test version of photopost with the original and spotted the missing row in the test version.
I've had a horrible three weeks trying to get this done so I hope that this posting saves someone else the grief I've been through.
Last edited by sheri9642; December 16th, 2005 at 06:34 PM.