The bug has been filed and a fix is already in the nightly build, which has just been built 24 minutes ago. I'd appreciate if you tried it out with your older, larger sized images and let us know if it fixes the issue.
Thanks!
Also, to find the error, I copied the image URL like so:
`http://cafeandrew.com/gallery/zp-core/i.php?a=birthdays%2Fhalvorsen%2Fsara%2F082408a&i=DSC_1127.jpg&w=480`
And then used the secret debug backdoor, by adding `&debug` to the end

`http://cafeandrew.com/gallery/zp-core/i.php?a=birthdays%2Fhalvorsen%2Fsara%2F082408a&i=DSC_1127.jpg&w=480&debug`
This only works for images that have not yet been cached, as it will use the direct URL out of the cache in that case, and the processing script only runs once. Quite efficient.