Ok, after testing a number of different installs with different versions of ImageCache & ImageField, I believe some people might be having problems if they have different versions that aren't the dev releases (imagecache-5.x-1.x-dev.tar.gz & imagefield-5.x-1.x-dev.tar.gz). I'm not familiar with the internals of these modules but trying to use imagecache-5.x-1.3 & imagefield-5.x-(2.x-dev/rc1/rc2 & 1.2-rc1,1.1) have resulted in various errors with attempting to create products with attached images right out of the box.

I don't think this is necessarily the case with demo.ubercart.org. It looks like there might be something messed up with files dir structure that's causing things to break there. I'm going to try to get this issue fixed, it might just be best to rebuild site since it was based on an old copy of livetest.