Hello, I had this problem to, with the newer GD that produces PNGs.
What I did was calling the PHP script from within an IMG tag, and did something like this:
... src="img.php?text=hello there friend!"...
The problem is the spaces between the text. In Netscape it won't even display more than the second word, and IE will then only show it as bmp (when you try to save it you will see).
Just do this instead:
... src="img.php?text=hello%20there%20friend!"...
the %20 is a space in, ahhh... unicode or whatever they call it.
cheers,
DrTebi