the error messages above are for the update page only, does the insert page work?
on the insert page, the default file setting is using a relative path:
'DefaultFileName' => "../img/design/spacer-30.jpg",
the default file name is just the file name, it should not include the path:
'DefaultFileName' => "spacer-30.jpg",
in your php.ini file, make sure that the upload_temp_dir is properly set.
see the xampp documetation for locating the php.ini file: