In my case the problem was with the image files themselves.
Image displays in Firefox, but not in IE.
The cause was determined to be that the JPEG files were being saved with CMYK ICC (color profile) information. Firefox can handle this gracefully and display the image anyway. IE cannot. For the image to display in IE, it had to be saved with RGB color information embedded, or no ICC profile information embedded at all.
In my case, all that was required was to re-save the file with no ICC info embedded (uncheck the box at the prompt when saving), and then add the new JPG file via the osCommerce admin.