I got the same problem and here how I fixed it:
1. Download imagerotator package from the link provided in Gallery/Options/Slideshow in the Dashboard.
2. Upload the content of the downloaded folder imagerotator into wp-content/uploads. Remember all the files should be in wp-content/uploads, NOT in wp-content/uploads/imagerotator. I know they said you can upload it to wp-content/uploads or a subfolder, but I tried with the subfolder option and it didn’t work.
3. Go back to Gallery/Options/Slideshow in the Dashboard, and click on the button Search Now, it should provide you the Path to the Imagerotator (URL): http://yourdomainname/blog/wp-content/uploads/imagerotator.swf
4. The slideshow should be working now.
