Update
I've installed Apache and all is well, Thumbnails make such a difference to the over all look of any forum ( my opinion

)
For anyone having problems go install Apache ( assuming your on a windows based box, added security benifits too.
Make sure there after that you have uncommented php_gd2.dll in your phpinfo file, also make sure your extensions folder is in your phpinfo.
Apologies if any of this is wrong still a php virgin (kinda)