Okay, I've gone into more detail on everything. The cp_settings are actually fine. That code is executing. The issue seems to be that ImageMagik is naming the newly sized files with extensions of .mgk and I really don't quite understand when, where or how those files are supposed to replace the originals.
As I said, my data directories all contain two versions of each file name. The .jpg version and the .mgk version.
For example, after create_thumb executes, I have:
The variables are
Which I believe is fine. So at that point, somehow those mgk extensions still need to be renamed somewhere.