There would be I assume some type of permissions error involved here if normal upload works. The flash uploader uploads files to the users upload directory and then you hit submit to process the users upload directory. The only way to get no images to display is going to be one of two things.
1. In usergroup permissions for vbgallery upload from server is not checked and it needs to be to process a users directory bypassing the http prompt thing.
2. The files never make it to the users upload directory for some reason hense there is nothing to process.