Looks like a problem with Pillow, the library that generates the
thumbnails. Make sure you have installed the system-wide requirements
defined in the installation page of the docs. After that, try
reinstalling Pillow in your virtualenv, or creating a new one just for
good measure.
http://mezzanine.readthedocs.org/en/latest/overview.html#dependencies
Another user seems to be having similar issues, and the investigation
going on in this thread might be useful:
https://groups.google.com/forum/#!topic/mezzanine-users/kNk1syn_FaI
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