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Your error can mean two things:
1. you don't have GD library turned on (in config file or script itself)
2. your GD lib is old
You can check both of these with phpinfo(). If it has somewhere "GD Support" with value "enabled", then it's (obviously) turned on. Minimal version has to be (I think) 1.6.2. If it has too small version, you need to upgrade it (or ask your WSP to do so).
If GD is not enabled, you can enable it in php.ini (search for "extension=gd.dll" or something similar and decomment it) or by calling dl() in your script (check the manual for details).
Good luck!