strange, i can see the error, i dont kno much about image formats but you should try another compression like tga or pcx, not sure though but i do know thats never happened to me...
engine's 2d panel system(coding and usabilty wise) is great, but rendering can be improved(like when you rotate a panel or a needle id gets jittery...)
you can try darkinferno's suggestions if that doesnt work, width and height powers of 2.