And I also notice in that error it says, "(include_path='.;C:\php5\pear')"

I don't have that folder structure. I have this:

C:\wamp\bin\php\php5.2.5\PEAR
Not too sure, but I think this might be in you php.ini file. I would look in that file to make sure that the path is specified correctly. Do a search for "pear", because php.ini is a fairly long file to scan by eye.

This may not solve the image handler problem, but it is obviously an error worth looking into.

The image handler problem may be solved by re-uploading every file making sure the file structer is matching exactly. I had something like the same error and found that it was because I misplaced one of the many files during the upload process.