While I may be a newb to developement I really don't see what the issue is.

Fat George's file upload for Xmod ($15 from snowcovered) can do all of the things you are speaking of plus more:
resize on-the-fly, thumbnails on-the-fly, shrink only (small images aren't increased), watermark on-the-fly, maintain aspect ratio, pad the image with background color to maintain aspect ratio, etc., etc. What more do you need?

If the Fat George/Xmod solution is not acceptable maybe you should look at the Cute Editor from Cutesoft or the RAD editor from Telerik. I'm sure that one of these or both can do what you're looking for. And both have providers for DNN.

In my opinion DNN is a framework, not the complete solution. Much like a house. You don't expect the framework of your house to do plumbing or electrical do you?  If image management is important install a sub-system that handles it better than the framework could ever hope to.

I agree that DNN needs a better image manager natively built in. Specifically, it should have the option to restrict which images appear to users in the image manager based on what they have uploaded (tied to their UserId). Right now, if my DNN site has 20 users, all 20 users can see (and therefore edit/delete) all images that have been uploaded through the image manager (no matter who uploaded them). But, in a community environment, each user should only be able to see/edit/delete the images they have uploaded. Is this possible right now and perhaps I am missing how to do this? Or, is there a third-party DNN module that provides this functionality?

I agree with a centralized (unified) image system. If nothing else, I would like to see image uploads have the ability to be resized/resampled on upload.

A lot of people receive their images from digital cameras and want to upload the images. There are many people who don't have a clue about resizing their images, they just believe it should happen automtically.  It would nice if the built in file upload utility could allow for automatic resizing/resampling - that would solve a lot of my problems.

The image editor in Cute Editor does a good job as an image editor, and since it replaces the FTB editor, it gets pretty close to a unified system. There are 2 issues I have seen with it, 1, it requires you use the HTML/Text module. If a user wants to resize an image, they're not going to search for this module. 2, it assumes the user knows what they are doing. Which again is why automatic resizing/resampling on upload is a good idea.

I would like to see a system where a user uploads their 1200 pixel image and the image is resized by the upload utility automatically based on an admin setting. Maybe it could be built into the module settings.

Thanks. My 2 cents.