Login Image Errors when trying to set new Login Image

Hey Guys,

I'm getting the following errors (see below) when trying to upload a new login image.

Setup is as follows:
WP 3.0.5 - Multisite / Subdirectories
Login Image 1.0.7
Nginx

I am guessing it is a server setup thing but I have no idea where to start. Permissions appear to be fine.

Warning: chmod() [function.chmod]: No such file or directory in /home/traus/sites.thomsonreuters.com.au/public_html/wp-content/plugins/login-image/login-image.php on line 214

Warning: unlink(/XXXX/public_html/wp-content/login-image/login-form-image.png) [function.unlink]: No such file or directory in /XXXX/public_html/wp-content/plugins/login-image/login-image.php on line 215

Warning: imagecreatetruecolor() [function.imagecreatetruecolor]: Invalid image dimensions in /XXXX/public_html/wp-includes/media.php on line 999

Warning: imagecopyresampled(): supplied argument is not a valid Image resource in /XXXX/public_html/wp-content/plugins/login-image/login-image.php on line 144

Warning: imagepng(): supplied argument is not a valid Image resource in /XXXX/public_html/wp-content/plugins/login-image/login-image.php on line 151

Warning: Cannot modify header information - headers already sent by (output started at /XXXX/public_html/wp-content/plugins/login-image/login-image.php:214) in /XXXX/public_html/wp-includes/pluggable.php on line 890

I have a similar issue with the avatar plugin when I try to use the "Alternative Upload" Method - but it's not an issue because the normal upload method works fine.

Thanks in advance.