Are you running WordPress with Apache 2.x+ and PHP, with Fast CGI installed in your Apache server? You may experienced/experincing distorted display of your uploaded image in your blog.

Actually this problem is not only for your image uploads, also for any file uploads. Because your file uploads are terminated before completion and partially uploaded. A communication issue with Apache and PHP causes this error on FastCGI activated webservers.

When you upload a file (image/any) to the server which is size more than the default size (2K or 10K) will broken by FCGI Apache module.

More detailed error info available at WordPress Forum. see the following link for the error and my solution,
http://wordpress.org/support/topic/350699?replies=4

Solution:
Download and replace the updated fcgi(2.3.5) module from http://www.takeyellow.com/apachemirror/httpd/binaries/win32/