I have recently installed Bixie Pro and ran into an issue. I am unable to upload certain .JPG files but can upload others (it appears as if the page hangs and I get the spinning wheel with no thumbnail image or confirmation text). After trial and error, I found that if I turn OFF 'Show Thumbnail' in the settings, the same files upload fine. When I went back and turned ON 'Show Thumbnail' it failed. Somehow this problem is only happening to certain images and I only used .JPGs and all were from the same camera source. The problems seems strange.

I looked in the 'virtueupload' folder on the server and all the images were there (even those when the upload appeared to fail) however the thumbnails on the failed uploads were non-existent) and in the 'Uploads' manager shows no thumbnail and a filesize of 0mb but the large version of the image is on the server.

There seems to be an thumbnail issue...has this ever been an issue before? Any suggestions on a fix?

It is a thumbnail issue indeed. Probably the filesize is too big to render a thumbnail and your server memory runs out.
That's why there is the setting in VirtueUpload where you can set the maximum thumbnail-size. Try how big the file can be before it fails the thumbnail creation, then set the max thumb size like that. Bigger files will get a file-icon and not a thumbnail.