I just noticed a strange Photo album thumbnail display bug on both my iPhone and iPad runnign 4.2.1. If I save a PNG file (which has a transparent background) to my album, the thumbnail on the iPad shows the PNG image overlapping an image I have previously deleted. If I save more images off the internet that either have transparency or are narrow, the thumbnails keep showing the images overlapping previously deleted images. On the iPhone, the thumbnail itself shows up correctly, but the thumbnail of the image on the Albums page shows the same overlap issue.
I assume this is widespread since it occurs on both my iPad and iPhone. I have reported it through feedback, but thought I would mention it here as well to assure myself this is on all iOS devices. Seems like a potential lack of security, if perhaps you deleted an image you didn't want anyone to see, then it shows up in the thumbnails, overlapped, but still clear enough to see.
I have encountered the same issue. This is problematic for me because I had been capturing PNG images of confidential medical documents (using the "home+sleep" screen cap function) for brief reviewing of key patient information. Even in the small thumbnails it is possible to identify some personal information when these ghost images appear behind new thumbnails. There should be some way to dump old thumbnails or prevent their storage after being "deleted" altogether.
Out of curiosity, do you manually enter your iPad's DCIM folder to delete photos (through Explorer or Finder)? I do occasionally and I also have this problem. Has anybody NOT touched the DCIM folder and still experiences this problem? I just want to eliminate one possibility.
This may be an old thread, but I still find this to be a present issue in iOS 7. I get the same exact symptoms you described, and considering the date of the thread, I'm surprised that iOS 7 still wasn't fixed for this.
I am experiencing the exact same issue with iOS 7 as well...It is an issue that most people probably wouldn't discover on their own, but once you know it is there it is quite concerning.