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Well I would suggest you make sure you redownload the build and replace your files just to be sure you dont have a mix of old and new files when you last upgraded.
When you create a category in the new classifieds a thumbs and large directory are created under the main category. So for now replace your files except config files to ensure you have no old files and then manually go through your data directory and make a thumbs and large directory for any category missing them and set them to 777 or try running this script. Rename to fixcats.php
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