IH2 no longer creates images in the large and medium folder. You upload the largest version you want shown, and IH2 creates your medium and small sizes in the bmz_cache folder. So on the product information page, you see what you set for medium sizes, on the product listing pages, you see what you set for the small image, and when you click to enlarge you see your large size. Do you actually have the older version, or perhaps you had the older version, and didn't fully change over to the newer version? Your site shouldn't be pointing to medium and large folders if you're your using the version for 1.3.7.
Bookmarks