Here:

RevolvingDork says:
Hi all,

We’re aware of the image uploading issues — we’re working on it now.

We’ll post when it’s all fixed…
Posted at 2:39 pm, August 31 2007 EST

EDIT:

RevolvingDork says:
Hi all,

We had an issue with our image servers this afternoon that prevented images from being uploaded and processed properly.

We’ve got it fixed up now, so listing may resume. :]

If you listed or relisted images during the problem, you’ll have to re-upload them. You can do this for free by editing the listing.

We’re sorry for the inconvenience — the number of images on Etsy is growing by leaps and bounds every day, and it can be hard to keep pace!
Posted at 3:15 pm, August 31 2007 EST