I had the same problem as jboyd1189 at yahoo dot com but I solve d it allocating more memory dynamically.
Usually the memory_limit var on php.ini is set to 8M. Unfortunately, the required amount of memory to manage a PNG image about 1000x1000 could be bigger !
The approach I used to solve the problem is:
1-Calculate the memory required by the image
2-Set the new memory_limit value
3-Create the PNG image and thumbnail
4-Restore the original value
1-The following value works for me:
$required_memory = Round($width * $height * $size['bits']);
Note that for JPEG the requirements are not the same:
http://es2.php.net/manual/en/function.imagecreatefromjpeg.php#60241
2-Use somthing like:
$new_limit=memory_get_usage() + $required_memory;
ini_set("memory_limit", $new_limit);
4-ini_restore ("memory_limit");