Zach,
I'm not sure if you tried the correct file I posted above. (I see it's no longer on that upload site, so I just uploaded it directly to my server).
This one of the files that is giving me issues when it creates a thumbnail:
http://www.sitexperience.com/ski/test.gif
I'm not sure how to check the php cache.. I'm on my own dedicated server, and can do anything I need to it, to get this to work correctly.
Thanks a million for your help!! This is driving me nuts!