Hi Scott,
Does this work for other controls? Does the same thing work if you use the same image in a PictureBox control in DotNet? My guess is that this is not a limitation of the grid, but a limitation of the DotNet Framework. Although I could be wrong.
You can, of course, Submit a feature request to Infragistics
You may want to check MSDN or the Microsoft forums. You can't be the first person to notice this. Maybe someone else out there has a solution. :)