vicks0: i've never seen that error, but I googled your error (obviously taking out the file path).
have you tried saving it out as a different file format? like png or tga?
this guy says that's what he did when he tried a jpg texture
TerryG: it looks like you're modifying the default lambert shader. If you are then you should stop doing that. Remember that all new objects have that shader applied to it. If you want to put a different shader on then you should select Assign New Material...
that's a "Ch" pronounced as a "K"
Computer skills I should have:
Maya, XSI, Photoshop, AfterEffects, Motion, Illustrator, Flash, Swift3D