I started having this problem. with registered users. As an admin I do not have this problem when I upload photos. I thought it was a permission issue but everything looks good.
When a registered user tries to upload a single photo to the gallery they get the following error.
No Image specified. If you followed a valid link, please notify the administrator
I have all my gallery directories all set to 777.
As I said the administrators can upload photos but the registered users can not.