Several things, Doug.
First, there is no IMG photo file format. Typically, image files end in .JPG, .JPEG, .TIFF, .BMP, .PNG, .GIF, etc.
The IMG in your file names likely starts at the beginning of the name and is simply part of the naming scheme. It's the part of the name after the . (DOT) that refers to the format.
I just uploaded a .JPG to the Pictures & Albums section and it loaded fine. However, there are limitations, as below.
Pictures Remaining
20
Maximum File Size per Picture
48.8 KB
Maximum Picture Dimensions
600 by 600 Pixels
If your image files do not comply with the above requirements, that may be why you're having trouble.
Using a free online image storage place, like
TinyPic - Free Image Hosting, Photo Sharing & Video Hosting, and linking to it is far preferable.