Pattiann is right, this is exactly what the problem is.
You can test it by changing the size of your hoop (that won't help you with taking it to your machine, it still won't work) and requesting those designs. If the photo shows up, that is what the problem is.
Check into the Download Designs for designs that are for your hoop size. You can still do embroidery, but you need to be more careful about being sure the designs will fit. The purchase designs also need to be the correct size. You can download my "Garden Sayings" from my current blog. They are all set for 4x4 hoops.
Enjoy what your machine can handle, there are still plenty of designs to choose from! When you are ready for a new machine, things will be so much more fun!
Pat, The Avid Embroiderer
If you are interested in selling your projects, you can determine your costs and profits quickly with my Spreadsheet.
If you want a lot of great information on working easier, faster and more confidently on your computer, check out my Tips and Tricks.
If you want to see my pashminas (that I successfully sell retail) check them out here. I also wholesale them.