I just tackled a similar problem.
First find out if you have this file
php_gd.dll
This will be in your extensions folder in your PHP directory.
If you do have this file, than you need to go to your php.ini.
You will need to do 2 things here.
1st.
define a path to your extensions
extension_dir=C:\PHP\EXTENSIONS
mine looks like that.
Than you need to find
;extension=php_gd.dll
and take the ; semi colan out.
save your ini and it should work.
John