Solution founf here! http://drupal.org/node/301866

#6

301866: The selected file xxxxx.jpeg could not be uploaded. Only JPEG, PNG and GIF images are allowed. (#6)
zbricoleur - September 12, 2008 - 17:19

I fixed this by modifying the core image.inc file. I guess I'm too lazy to do it right.

In /includes/image.inc, change line 117 from:

if (!is_file($file)) {

to:

if (!is_file($file) && !is_uploaded_file($file)) {