after about 30minutes of searching I found out what my two problems were:
1. Could not create thumbnail
cmd.exe (located in system32 folder) did not have IUSR permissions, which needs read and write permissions as well
2. Broken images or red x's
config.php search for 'albumDirURL' and most likely there is entry that reads "http:///" change that to "http://" minus the quotes
Thank you for a great piece of code/software!!!!