I have done exactly that, twice. Same problem occurs, and what's more I have uploaded silverstripe to another domain on my reseller account and the same happened there too.
I have even tried to delete the images, then re-upload under and different name and then rename them back to the original name but still to no avail.
Really wierd problem, I am almost sure this must be something to do with my server rather than silverstripe but just don't know what to do about it. I have contacted my provider and will await to see what they say.
Tried it in IE6, IE7, Firfox and Opera. Also tried on a different machine.
I have contacted my provider and they advised that maybe something has changed in the ftp settings which means rather than detecting the prefered method for uploading to the server, it has chosen something unorthodox, ie something that is not ascii or binary.
I'll have to recheck when I get in tonight, although I haven't changed anything myself.
One possibility would be to upload the compressed file and decompress it on the server using your provider's control panel/file manager. Not all hosting providers give you this option, but if you have either CPanel or SSH access you should be able to do it.
Yeah got it all working fine now. The problem was simple, I feel a bit stupid actually. Basically on my ftp client for some reason the settings had changed, it was a case of making the ftp client auto detect the prefered upload method of the server, for images to upload correctly it must be in binary or ascii code.
No idea how that happened, pretty wierd but glad I got it sorted out.