Could you check in your php info which image handlers are available? And which of those are set in your image.ini file?
I've only found one possible related thread on the forums regarding your problem, see http://ez.no/tw/developer/forum/developer/what_does_the_filter_geometry_scaledownonly_is_not_supported_by_any_of_the_image_handlers_will_ignore_this_filter_mean
Regards Robin
Board member, eZ Publish Community Project Board - Member of the share.ez.no team - Key values: Openness and Innovation.