It should hold the setting, so apparently it's bailing out at some point.
If you want you could try going to the admincp, and at or near the bottom of the list there should be a "kh99 Rotate Attachment" setting page. There you can turn on debugging and specify a file to write the messages to. It has to be a writable directory. If your server is set up so that the web server process can write to the forum directories then you can just put a file name, otherwise you'll need a path to somewhere with write permission.
Do you know if you have GD configured? You can go to Maintenance > View PHP Info and see if it's listed in the configuration (there'll be a section with GD at the top, for me it's between ftp and gettext).
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