dk-
I can't remember exactly what I did but I believe I used the info from php.net at the below link. After you make changes remember to restart your server (service) not the machine. Then do an 'installation check' in the admin and check GD lib Support and GD lib >==2.0.
Sorry I can't give much detail but I tried so many things to get it to work.
Some other notes:
Check your php.ini and
Search for [GD] and mirror the following
[code]
; Tell the jpeg decode to libjpeg warnings and try to create
; a gd image. The warning will then be displayed as notices
; disabled by default
gd.jpeg_ignore_warning = 0
GD2 DLL php_gd2.dll
[/code]
Also make sure the [php_gd2.dll] actual exists in your ext folder! If not download the install pack from php.net and copy the ext file into the dir.
Another helpful link:
http://us2.php.net/install.windows.extensions
Hope this helps
-dubz-