GD toolkit is acting up ! Please help.

Hello
I am running a fresh install of a gallery 2.2, everything works fine with the gallery, php.ini was already modified but here is what happens.

GD Toolkit on.

When uploading a large image lets say 3888x2500 or so, the notification page does not show that the image was uploaded. When i refresh the main page of the gallery, the spot where image is, there is a border with file info, no thumb image and when i click on it it takes me to blank page.

I turn GD toolkit off.
I upload the same image. Everything is great ( i get confirmation page that this picture has been uploaded) except there is no thumb of course, but when i click on the image, it shows up as a full image.

any ideas what could it be ?
it has to be a problem with GD.

thank you
Marius