Windows 7, Visual Studio 2008, and Embedded Resources producing compile time errors.

Error 19 The "GenerateResource" task failed unexpectedly.
System.Runtime.InteropServices.ExternalException: A generic error occurred in GDI+.
at System.Drawing.Image.Save(Stream stream, ImageCodecInfo encoder, EncoderParameters encoderParams)
at System.Drawing.Image.Save(MemoryStream stream)
at System.Drawing.Image.System.Runtime.Serialization.ISerializable.GetObjectData(SerializationInfo si, StreamingContext context)
at System.Runtime.Serialization.Formatters.Binary.WriteObjectInfo.InitSerialize(Object obj, ISurrogateSelector surrogateSelector, StreamingContext context, SerObjectInfoInit serObjectInfoInit, IFormatterConverter converter, ObjectWriter objectWriter)
at System.Runtime.Serialization.Formatters.Binary.WriteObjectInfo.Serialize(Object obj, ISurrogateSelector surrogateSelector, StreamingContext context, SerObjectInfoInit serObjectInfoInit, IFormatterConverter converter, ObjectWriter objectWriter)
at System.Runtime.Serialization.Formatters.Binary.ObjectWriter.Serialize(Object graph, Header[] inHeaders, __BinaryWriter serWriter, Boolean fCheck)
at System.Runtime.Serialization.Formatters.Binary.BinaryFormatter.Serialize(Stream serializationStream, Object graph, Header[] headers, Boolean fCheck)
at System.Runtime.Serialization.Formatters.Binary.BinaryFormatter.Serialize(Stream serializationStream, Object graph)
at System.Resources.ResourceWriter.WriteValue(ResourceTypeCode typeCode, Object value, BinaryWriter writer, IFormatter objFormatter)
at System.Resources.ResourceWriter.Generate()
at System.Resources.ResourceWriter.Dispose(Boolean disposing)
at System.Resources.ResourceWriter.Close()
at Microsoft.Build.Tasks.ProcessResourceFiles.WriteResources(IResourceWriter writer)
at Microsoft.Build.Tasks.ProcessResourceFiles.WriteResources(String filename)
at Microsoft.Build.Tasks.ProcessResourceFiles.ProcessFile(String inFile, String outFile)
at Microsoft.Build.Tasks.ProcessResourceFiles.Run(TaskLoggingHelper log, ITaskItem[] assemblyFilesList, ArrayList inputs, ArrayList outputs, Boolean sourcePath, String language, String namespacename, String resourcesNamespace, String filename, String classname, Boolean publicClass)
at Microsoft.Build.Tasks.GenerateResource.Execute()

This was a bit frustrating, but in this example, it was because the offending image in the resource was a JPG instead of a PNG. 9 times out of 10 we use a PNG image anyway, but in this example, converting the offending image into a PNG then rebuilding the solution resolved the issue.

There is another issue that can come from this as well (per my research). If you have an image that is larger than 64K, this can possible creep up as well.