SOLVED:
Not sure about the technical reason for the solution, however, I found out what was the issue.
First of all, I tried experimenting by importing other jpgs from different sources. Some worked, but most failed. One common thing about all the jpgs that failed: I had minipulated them with photoshop. So I got to thinking, "maybe it is the way that I am saving the file." Sure enough, that was the problem.
When saving a jpg, there is an option called Format options. Your choices are Baseline, Baseline Optimized, and Progressive. I was using the Progressive option. When I changed it to one of the other two and saved the jpg, it would import fine into Anime Studio.
Bottom line:
This only affects a Windows 7 machine. XP would work fine with any format option. This only affected Anime Studio's use of jpgs....all other programs were not even bothered by the Format option.
Like I said, not too sure about the technical side of the solution (though I think I might have a good idea), however, works like a charm.
Hope this helps someone else out on the forum.
