Going by the datasheet of the serial GLCD, it is obvious that the code in the AtmelAVR is pretty limited in capabilities. It can do text, pixels, lines, boxes, circles and not much else.

If you want to do pictures, then look into the COLOR LCD. It is a far more capable product that can even do full motion video (in color) as shown in the video. I have one and would highly recommend it. Full info here http://www.4dsystems.com.au/prod.php?id=114

In fact, since I no longer have a need for it, I may consider running a contest to give it away.