Marcus,
The lack of the php extension library GD is a common problem but the method of curing it seems to depend on the version of PHP and the operating system that you are using, whether you have more than one GD installed at once, and other factors. The Moodle documentation mentioned here is probably the place to start.
http://moodle.org/mod/forum/discuss.php?d=4842
http://moodle.org/mod/forum/discuss.php?d=5084
http://moodle.org/mod/forum/discuss.php?d=4454#20081
http://moodle.org/mod/forum/discuss.php?d=4673
Tim