r712, vhsost = on.
You're going to have to forgive me on this one. I know little about GD and how php generates image files. :)
Per this thread in the forum:
http://mu.wordpress.org/forums/topic.php?id=1652
I'm getting that error when I try to upload a *.png file. I gather that that function 'imageantialias' has some issue with *.PNGs but there appears not be any any error check for them in that function before it hits that line.
I do know that if it skips lines 867-8 (ie I comment it out), it uploads fine but a thumbnail is not generated. That might explain the occasional "No thumbnail" and the line is crossed out issue we get on occasion over on the WP.com forums. I don't remember anyone ever mentioning what file type they are trying to use when they get that error. (And we all know how hard it is to drag details out of folks.)
Is this a defect? Sounds like we need to do some file type checking.
Hope this helps,
-drmike