Doesn't 1.3.5 use the python script lyxpreview2ppm.py?
Yes, it does.
It was, after all, written especially so that the Windows world might have a hope in hell in getting it to work.
Hope springs eternal in the Windows world. It's just seldom fulfilled.
I'd expect your lyxrc.defaults to contain: \converter lyxpreview ppm "lyxpreview2ppm.py" ""
It does.
-- Paul