Resource Import Tool error: "Unable to copy the image to the local package server"

I'm trying to import a GHO image to my NS, but every time I run ResourceImportTool.exe to do so, I get this error box: "Unable to copy the image to the image to the local package server"

I tried running the tool from cmd line as well, by filling out Import.XML, but it did not give me any output, and did not succeed either because I don't see the imported image files under "<NS>\\NSCap\bin\Deployment\Packages\Images\".

Things were working fine before I upgraded to 7.6 HF7. Any ideas why this could be happening?

I am attaching screenshots and my XML file. Kindly have a look. Thanks in advance.

I am running as admin, and the user has CMDB write access.