OK, Moved to a new server and also set this script up on a godaddy server with the same results. Upload and resize and image and get 0k jpeg files when completed.
netPbm and the libJpg libs are installed.
After the file is posted, I can see the details of the file under $_FILES so I know that the file is uploaded, then we enter
system("djpeg $imgfile >$tmpimg");
After this $tmpimg does not esist as far as I can see.