I just tried to upload a jpg, a small one and a large one and it started to upload the attachment but within a few seconds it returned the not a valid image error.
I am wondering is you have had problems with hot linking in the past that you may have added some code to your htaccess file to prevent access to some image file extensions?
The other thought has was whether you have tried to reenter the extension in the attachment manager. I know in the past that has worked for similar issues with image extensions not being recognized. Try adding jpg to the end of your listing and see if it allows them to be uploaded.
HTH
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