I suggest the following:

1.  Check that ImageMagick's bin directory is on your system path.  A quick way
to do that is to run 'convert -version' in a DOS window.  DOS cannot find the
convert utility, either IM is not installed or it is not on the command path. 
(I think Windows has a convert.exe program of its own, unrelated to IM.  If that
runs, you may need to move IM's bin directory to the front of the system command

2.  Assuming you get the IM convert version, cd to the LyX doc directory, drill
down to where mobius.eps is (I think it's in a subfolder named clipart), and run
'convert mobius.eps mobius.ppm' to confirm that the convert program is working


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