That warning tells it all - you site php.ini has some disabled functions ( escapeshellarg, system,... ) and tex filter can't execute the needed commands - not even with mimetex.xxx )
This is one of those problems that you need to solve with your host - otherwise there is no work around. You can see a line for disable_functions in php.ini / php info and on "normal sites" people leave disable_functions empty and use other security methods - a solution to disable functions of php is typical only for shared hosts.
See for example http://moodle.org/mod/forum/discuss.php?d=150982#p662397