whats the max file size?
is it giving you an error? if it's giving you an error that's a different issue entirely. it's an SMF thing. badspot can't fix it (well, he
could, hypothetically, but I'm sure it wouldn't be easy, and I'm not even sure how SMF feels about people editing their software), and the people who run SMF refuse to fix it themselves
"in other words, the images that your users are trying to upload are either infected or appear to be infected because whoever made th eimage used something that put crap in the image header."
their suggestion was to "Try one of the many PhotoShop alternatives, such as The Gimp or Paint .NET"
http://www.simplemachines.org/community/index.php?topic=513488.0