Is it original PNGs and JPGs, or just PNGs, that are affected? GIFs can have 256 colors and transparency, JPGs can have many more colors but no transparency, and PNGs can run the gamut, so I've got PNGs uploading as GIFs and I'm thinking that it might just be PNGs that do that fade thing.
Untested, but in the PhotoPlog functions.php file find and add the part in bold, and see if it prevents the fade:
Code:
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