The defulat value in the database is used if the data being inserted to that column is NULL. the insert record will be posting a blank string instead to that column. a blank string is not the same as a NULL Value (NULL is the absence of a value, a blank string is a string with nothing in it, but it is still a string).
I take it you are using File Manipulation to upload a photo?
In the upload file behavior, set the default file to noPhoto.jpg. make sure to bind the ProductImage column to the File Upload Server File Name variable. when no photo is uploaded, the server file name variable will be given the Default File name.