I ran process monitor to see what is going on:
10:15:52.6793986 AM w3wp.exe 4364 QueryOpen D:\Shares\Websites\
www.domain.com\DnnImageHandler.ashx NAME NOT FOUND
10:15:52.6794956 AM w3wp.exe 4364 QueryOpen D:\Shares\Websites\
www.domain.com\DnnImageHandler.ashx NAME NOT FOUND
10:15:52.6796515 AM w3wp.exe 4364 QueryOpen D:\Shares\Websites\
www.domain.com\DnnImageHandler.ashx.cshtml NAME NOT FOUND
10:15:52.6797651 AM w3wp.exe 4364 QueryOpen D:\Shares\Websites\
www.domain.com\DnnImageHandler.ashx.vbhtml NAME NOT FOUND
10:15:52.6798614 AM w3wp.exe 4364 QueryOpen D:\Shares\Websites\
www.domain.com\DnnImageHandler.ashx\default.cshtml PATH NOT FOUND
10:15:52.6799149 AM w3wp.exe 4364 QueryOpen D:\Shares\Websites\
www.domain.com\DnnImageHandler.ashx NAME NOT FOUND
10:15:52.6800032 AM w3wp.exe 4364 QueryOpen D:\Shares\Websites\
www.domain.com\DnnImageHandler.ashx\default.vbhtml PATH NOT FOUND
10:15:52.6800512 AM w3wp.exe 4364 QueryOpen D:\Shares\Websites\
www.domain.com\DnnImageHandler.ashx NAME NOT FOUND
10:15:52.6801386 AM w3wp.exe 4364 QueryOpen D:\Shares\Websites\
www.domain.com\DnnImageHandler.ashx\index.cshtml PATH NOT FOUND
10:15:52.6801866 AM w3wp.exe 4364 QueryOpen D:\Shares\Websites\
www.domain.com\DnnImageHandler.ashx NAME NOT FOUND
10:15:52.6802750 AM w3wp.exe 4364 QueryOpen D:\Shares\Websites\
www.domain.com\DnnImageHandler.ashx\index.vbhtml PATH NOT FOUND
10:15:52.6803230 AM w3wp.exe 4364 QueryOpen D:\Shares\Websites\
www.domain.com\DnnImageHandler.ashx NAME NOT FOUND
10:15:52.6850908 AM w3wp.exe 4364 QueryOpen D:\Shares\Websites\
www.domain.com\App_Data\_imagecache\D8D698DDAE249938E359F722CE4D6EEE38F130D1.tmp NAME NOT FOUND
10:15:52.6854464 AM w3wp.exe 4364 CreateFile D:\Shares\Websites\
www.domain.com\images\no_avatar.gif SUCCESS Desired Access: Generic Read, Disposition: Open, Options: Synchronous IO Non-Alert, Non-Directory File, Open No Recall, Attributes: n/a, ShareMode: Read, AllocationSize: n/a, OpenResult: Opened
10:15:52.6854807 AM w3wp.exe 4364 QueryStandardInformationFile D:\Shares\Websites\
www.domain.com\images\no_avatar.gif SUCCESS AllocationSize: 4,096, EndOfFile: 3,046, NumberOfLinks: 1, DeletePending: False, Directory: False
10:15:52.6854935 AM w3wp.exe 4364 QueryStandardInformationFile D:\Shares\Websites\
www.domain.com\images\no_avatar.gif SUCCESS AllocationSize: 4,096, EndOfFile: 3,046, NumberOfLinks: 1, DeletePending: False, Directory: False
10:15:52.6855034 AM w3wp.exe 4364 ReadFile D:\Shares\Websites\
www.domain.com\images\no_avatar.gif SUCCESS Offset: 0, Length: 3,046, Priority: Normal
10:15:52.6855252 AM w3wp.exe 4364 QueryStandardInformationFile D:\Shares\Websites\
www.domain.com\images\no_avatar.gif SUCCESS AllocationSize: 4,096, EndOfFile: 3,046, NumberOfLinks: 1, DeletePending: False, Directory: False
THis is the result