Milligan, thanks for the help.
I have checked the things you mention.
My "Enable" flags actually are 'off' not 'offstage'
I do use Dreamweaver , and I read the post you linked and the solution you posted there, but I already have 'php-mysql' selected in the test server dialogue.
I also checked for the <?xml version.... line in my .dwt but I don't have it.
<!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN"
as my first line.
I don't have ZoneAlarm and I don't know what Netlimiter is.
However, while working on a DW tutorial for PHP I loaded and defined the sample site for the tutorial under the server and all images in that site work fine. That site is a peer of the non-working site under the /xamp/htdocs folder
I must have something messed up with this site that I copied into the /htdocs folder, but I can't for the life of me see what it is.