I've dug a bit further, this seems to only happen then the module 'Media Folder' is installed aswell.

Unfortunately I need the media folder module so will have to do without

Hi,
I got the same bug but using Orchard S3 Storage Provider (http://orchards3storage.codeplex.com/). Discussion at http://stackoverflow.com/questions/10948629/is-it-possible-to-use-imagegallery-module-with-amazon-s3.

I ran into the same issue with using the image gallery and the media folder modules. In the constructor of ImageGalleryService the following statement causes a circular dependency:

        if (!MediaService.GetMediaFolders(string.Empty).Any(o => o.Name == ImageGalleriesMediaFolder)) {
            MediaService.CreateFolder(string.Empty, ImageGalleriesMediaFolder);}

Options are a) comment out this code and ensure the "ImageGalleries" folder is created manually in the Media location or b) move this code elsewhere, e.g. to the method CreateImageGallery so that this gets created upon creating the first gallery... and c) whatever else you can come up with.

In addition, HttpPostedFileBase.FileName returns the full path when uploading a file, hence you need to update the AddImage method to the following to just get the filename:

    public void AddImage(string imageGalleryName, HttpPostedFileBase imageFile) {            
        AddImage(imageGalleryName, Path.GetFileName(imageFile.FileName), imageFile.InputStream);
    }

Hope this helps.