IOError: decoder jpeg not available
This probably means that PIL doesn't have JPEG support, because libjpeg wasn't found when PIL was being configured.
- Doublecheck the configuration of PIL.
- Change JPEG_ROOT in PIL's setup.py file to point to the directory where libjpeg is installed. See the comments in the file for details.
- Check that your program is picking up the _imaging module that you've built, and not some older version:
$ python -vv -c "import _imaging"
If you are on Mac OS X, there is a document explaining how to get libjpeg installed properly here.