Imagecache images shown for anon but not for uid=1

drupal-5.10
cck-5.x-1.10
imageapi-5.x-1.2
imagefield-5.x-2.2
imagecache-5.x-2.2

Multisite setup
File download public

Anon sees the post using two imagecache presets perfectly. Once logged in (UID 1 included) the images are replaced by the image file names.

UID 1 logs in and flushes the imagecache_presets, checks site folder files/imagecache and finds no images. UID 1 then goes to the default 'frontpage' and briefly sees the imagecache_preset images before they are replaced with the image file names, checks site folder files/imagecache and finds it populated with the imagecache_preset images.

As anon:
Right click hover over the imagecache_preset image and 'View Image', the image and its url are displayed appropriately.
As UID 1:
Log in and use the copied imagecache_preset image url from above and this message is displayed.

Content Encoding Error
The page you are trying to view cannot be shown because it uses an invalid or unsupported form of compression.
* Please contact the website owners to inform them of this problem.

Checked:
Enabled on second site (multisite) and same issues.
In accordance with 'Troubleshooting imagecache':
Drupal .htaccess file
files .htaccess file
Spaces in file names

Searched 'Issues Forums' for both Imagefield and Imagecache without finding a similar issue.