I was struggling with the NextGen Library earlier, everything worked except for Thumbnail generation.
My site is hosted at One.com. After discussing a few minutes with them we agreed upon the reason and the only solution to the problem, but they were not willing to do anything about it, for now.
The solution would have been to increase the PHP memory.
I got the error: exceed Memory limit. Require:24.98 MByte.
I asked for 32MByte, but they would not do it for the moment being.
If you are hosting your own site, you may do whatever you want on the server side, that’s why thumbnails generating was working on my localhost!

- grandpa -