@Greeps. Thanks for posting the link. I had a look at it. the current preview setup uses Google Docs Viewer for previewing image files. How Google Docs Viewer interprets the file type is out of my control. it is supposed to preview jpeg files, but if it doesn’t there is nothing I can do about it. What I intend to do in the next version is to not use Google Docs Viewer for images. That way, it would preview using the browser instead of the Google Docs Viewer.
As for the message when saving, this happens because it is being called form the Admin and not the Site. I will add some code in the next version to avoid the message. However, just ignore it for now. it only started showing since Joomla 2.5, if I remember correctly.