Can not attach and create thumbnails for jpg files over 825KB

Your board's URL: Domain Name = http://www.mywebsite.net Domain redirected from control panel to http://www.mywebsite.net/phpbb3
Version of phpBB3: RC5
Was this a fresh install or a update/upgrade/conversion (please be specific)? Fresh with database and etc converted from latest V2
Was this an install through your host? No
MODs you have installed: None
When the problem started: Ver 3 installation (not sure exactly what RC version)
Template(s) used: Sniper_Blue
Language(s) used: English
Version of PHP used: PHP Version 4.4.7

I can not upload, attach, and create thumbnails for images larger than 825 KB

If I do I get the following error:

Error 500 - Internal server error
An internal server error has occurred!
Please try again later.

All the attachment settings are set for no limit. I have checked all the extension and extension group settings.

I can attach a 3.2MB wmv, mpg, or mp4

I changed the PHPBB special category for images from "image" to "none" and it attached a 4mb jpg file. But when I set it back to "image" I get the error 500? It attached as a file with no thumbnail.

I had ImageMagick installed but I uninstalled it and I had the same problem

I turned off the create thumbnails and it uploaded and attached a 4mb jpg just fine.

Apparently there is a bug in the create thumbnail portion that is causing the error 500?

Robin Sr