When the RSS feed isn't available it's really hard to diagnose why. All the debugging I've done to date on the problem indicates that WP does not see the values sent by Picasa. Picasa is probably sending the values and something between Picasa and WP is ripping them out. I've been thinking about building a test into the install process to confirm that long variables can be received properly from Picasa.
The client side portion of this is entirely controlled by Picasa. You could try running with an IP traffic monitor to locate the packets being sent by Picasa... Yeah, real pain to debug this... The documentation from Google is really thin. It's possible that Picasa doesn't like something in the config and it's failing to generate the proper request, which is where a traffic monitor comes in to the debug picture.
As I have brainstorms I make attempts at improving diagnosability. This is an area that's been hard to sort out since the only time I've been able to recreate this failure is when I restrict the variable name lengths that get delivered to the server code.