hi
it needs to be a jpg image
now, if you have WD doing the direct web cam capture, then you can set wd to create a jpg file as well, i.e , webcamimagejpeg.jpg
and then use the general ftp setup to upload that file so that WDL can show it
thats what I do 
also, i now have WDL on the main WD web site
http://www.weather-display.com/