This problem is most likely caused by the user not having network rights to create, delete, and modify files in the pictdata subdirectory (or a subdirectory of the pictdata directory) of the Design Manager directory. The subdirectories may not be set to inherit the parent?s rights or special permissions are set for the subdirectories. The user must have full control over the Design Manager directory and ALL subdirectories (except for the client subdirectory which can optionally be set to read-only).
For instructions on setting network permissions, see here.
Also, make sure that if using terminal services that the terminals server instructions were followed completely (repeat them by uninstalling the client setup and starting at step 7 from the article found here.
It is also possible that the picture itself has an encoded rights feature on it. You should try to open the picture in a program such as Paint and resave the file. Using File ? Save As, you can save over top the file you already have. Then retry to load the picture into DM.