[eluser]woopsicle[/eluser]
i had something similar when doing some image manipulation stuff. i found that when resizing images bigger than ~1000x1000 is when the memory limit was being exceeded.
it is dependent on the memory limit setting in php.ini - most shared hosts are about 8mb, yours seems to be 16mb ?
if you want to confirm this is the problem, try uploading a little image (i.e. less that 800x600) just to make sure that works.
if it does, and you definitely need to resize pics of reasonable size - you will need to see about changing this limit on your server. if it is shared hosting this may be a problem.
try something like 20mb and try again.