Hi,
I can't figure out what is going on.  No matter what I do, It will put the first thumbnail on the line above (will be non clickable) and then the gallery will have a gray thumbnail in it's place - the other images work fine. 

redefinestandard.com/index.php/test

I tried changing the popup engine, but that did not work. 

When I insert an image into the article however, it will move that top image down into the gray box and the gallery will look fine.

Thank you.

This seems to be a css conflict with your template.
Please turn your template to a default joomla template and check if your issue remains.
If so, you should contact your template provider and ask him help you out with this conflict.

Will do.  Thank you.