I am still experiencing the same problem. I have tried a couple of different browsers with cleared cache and temp files, so I'm inclined to think it's a server setting somewhere. I looked through the DNN options and found that jpg files were OK (at least, in that one setting).
I'm concerned that perhaps there's a setting on the discountasp.net hosting service that I need to adjust. For example, is it ASPNET_USER creating this file? I'm new to discountasp.net so I'm not sure about the permissions. I notice I cannot see the smithcart directory on the DNN filemanager.
Thank you.