I just udated the version to 2.12 and tried it and still have the same problem.
The still images (gif and jpgs) are completely distorted in the movie produced for upload to youtube.
I am generating the movie in 320x240 format because the video clips I captured from youtube for this movie only work at this resolution.
The gifs and jpg stills I created in photoshop are 640x480.
The strange thing is that the first couple of stills in the movie seem to be OK but the remainder (about 10-15) are completely distorted. You can hardly read the text and the photos in the still are completely messed up. All stills were created the same way and some of the images/photos on these stills are the same. I used a template with the same images to create several of the stills yet only a couple display correctly.