Hi celticmoments,
We recommend uploading your images in the ".JPG" or ".GIF" formats but, since you aren't having any trouble with your ".PNG" images, there's no reason to alter what you're doing. If you run into any problems with your images in the future, the file type may very well be the culprit,so you may want to change the format to ".JPG" or ".GIF" and see if that alleviates the problems.
If you have any additional questions or concerns, please file a support case using the appropriate link on our help page:
http://www.auctiva.com/free-auction-software-help/help.aspx-Mike