images created but not scaled

This is driving me nuts.. i have a demo site set up at www2.mydomain and the production site at www.mydomain. Both site share the same code base so icache 2.1 and www db is a copy of www2 from last week. No db edits are made to www - content and config changes are done only on www2, then copied over when a new release is made.

It seems as though, only on www, when icache tries to build a preset img the scaling is not occurring - but the file is created and even more odd it is touched by something since the file size is now smaller than the orig img.

Both sites have GD installed.