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This is just from personal experience, but I always seem to have an easier time getting NetPBM to work than I do ImageMagick. There are precompiled binaries for Win32 from the main Gallery SourceForge page.
http://prdownloads.sourceforge.net/gallery/netpbm1.1-gallery1.0-win32.tgz?download
If this works, then the problem is pinned down to something strange with the ImageMagick installation. If it still generates errors, it might go deeper than that.
Either way, I reccomend keeping these just below your site root in something like:
C:\Program Files\Apache Group\Apache2\NetPBM\
Let me know how it goes, and good luck!