Hey
Your right this is not something we covered here.
What basically happens is this: The client looks for the jpg image first when it can't find one it will try and download the GIF version. If this is not found it wil give you an error.
There are a few things you can try: turn of norton is one, perhaps it blocks file transfers to the client. Norton has been known to cause problems with Palace.
The other thing is firewalls: do you have a firewall? If so try to see if port 9998 and 9990 and 9994 are open for Palace to use.
The other trick is simple: try and see if you can load the pics from the web to check your connection. then try the client.
Here is a Palace where you can try both:
Palace adress:
palace://fookerisland.com
media website:
http://fookerisland.com/palace/media/fookergate.jpg
Hope this helps you out a bit, you can try and download the client from Palace Planet but I doubt thats gonna make a big difference and you might loose props and stuff.