The first place to look if you are having problems with the Image module is your Drupal status page. Navigate to: Administer >> Reports >> Status reports. If there are errors on this page, fix them first. There are four things to check on this page:

1. File system Writable (public download method)
2. GD library 2.0 or higher
3. Image gallery Galleries defined
4. Image module directories Exists (sites/default/files/images)
5. Image toolkit The gd toolkit is installed

The image module works well with Drupal 6; however, you must configure Drupal to receive large file uploads. By default Drupal allows a maximum file upload of 1MB, the image module allows a maximum file upload of 800kB. Most images from digital cameras are much larger than this. There are three places where file upload limits can be configured. You may need to check all three if you are having problems uploading images.

1. Administer >> Site configuration >> Images
2. Administer >> Site configuration >> File uploads (if enabled)
3. PHP itself (you will needed to edit the php.ini file for your Web server)

If you want to attach images to other content types, such as a page, you will also need to enable and configure the Image Attach module. (This module is not in the list of modules in Drupal.org, it comes with Image module)
Once the module is enabled, configure the settings for each of your content types that will have images attached. This configuration screen is available at:
Administer >> Content management >> content type to attach images to >> Image Attach settings