For those who have your own servers... or worse, hosting companies that are not "Drupal savvy":
These problems will also occure when:
imagemagic is not installed or configured correctly, check at
yoursite.com/admin/settings/imageapi/config/imageapi_imagemagick
Also make sure its looking in the correct directory (check your leading / also, for example /user/bin/convert vrs. user/bin/convert)
What happens is you can link to the image but the thumbnails and smaller product images are never created. Its a little harder to sort because the error is likely not displayed until your in the configuration settings.
Last but not least the openbase_dir errors >.< ... just remember to reload your php.ini files before checking your changes....
Good luck! If you need help just ask, I'd like to spare others the trouble 
-[p]