Sometimes a server has a hard time working with a large image from a digital camera, they are usually really large in dimensions like 3000x2000. To get around the issue, you will have to resize them to something smaller such as 1280x1024 so the server can better process them. This would also decrease the filesize to get around the 2mb (assuming that is your setting) upload limit. But the error as indicated is due to the image dimensions no the file size.
-justin