Title says it.
See also:
http://forums.slimdevices.com/showthread.php?p=414545#post414545
It's reproducible on the WebUI (artwork supposed to be 50x50 is bigger) and it's the same for artwork resized on the fly and cached during scan.

Critical issue right now for me is it causes trouble in iPeng because artwork can take up way too much memory and is slow to render.

Andy, I put you to CC because you were the one answering on that thread.

The log file shows the following, looks like GD doesn't work.

Code:

[09-04-10 13:25:18.2536] Slim::Web::Graphics::processCoverArtRequest (114) this is a transparent png request
[09-04-10 13:25:18.2583] Slim::Web::Graphics::processCoverArtRequest (222) Asking for trackid: 5903 - cover at size 75x75
[09-04-10 13:25:18.2588] Slim::Schema::Track::coverArt (299) Retrieving artwork for: file:///raid0/data/nas/Music/Metal/Soundgarden/Soundgarden%20-%20(1988)%20Ultramega%20OK/01%20-%20Soundgarden%20-%20Flower.mp3
[09-04-10 13:25:18.2592] Slim::Music::Artwork::_readCoverArtTags (206) Looking for a cover art image in the tags of: [/raid0/data/nas/Music/Metal/Soundgarden/Soundgarden - (1988) Ultramega OK/01 - Soundgarden - Flower.mp3]
[09-04-10 13:25:18.3329] Slim::Music::Artwork::_readCoverArtTags (223) Found image of length [26945] bytes with type: [image/jpeg]
[09-04-10 13:25:18.3337] Slim::Web::Graphics::processCoverArtRequest (232)   The variable $actualContentType, which attempts to understand what image type the original file is, is set to image/jpeg
[09-04-10 13:25:18.3340] Slim::Web::Graphics::processCoverArtRequest (316)   got cover art image image/jpeg of 26945 bytes
[09-04-10 13:25:18.3342] Slim::Web::Graphics::processCoverArtRequest (593) Can't use GD for image/jpeg (music/5903/cover_75x75_p)
[09-04-10 13:25:18.3346] Slim::Web::Graphics::processCoverArtRequest (618)   caching result key: music/5903/cover_75x75_p, orig=/raid0/data/nas/Music/Metal/Soundgarden/Soundgarden - (1988) Ultramega OK/01 - Soundgarden - Flower.mp3