There are several threads and complaints from business owners that they cannot update their photos on their Google Places page.
The central thread is at the Google Places Help forum where Google has confirmed the issue.
The issue seems to be where using the image source feature from a third party site. It simply won't add a new image that way. Here is a picture:

Another issue I see is that all my business places images I uploaded years ago seem to be gone - maybe it is part of this bug.
Google's Vanessa confirmed the issue saying:
We know you're having trouble, and we're working on it -- but in the mean time, if you're having trouble uploading your photos via the Places dashboard, use the photo upload tool via the listing itself, and manage them via your Picasa web album.
Forum discussion at Google Places Help.

Comments:
Nick Stamoulis
12/14/2011 03:12 pm
Every businesses should set up a Google Places profile. Unfortunately, they don't make it easy for you. It's often difficult to get it up and running just the way that you want it to look. It doesn't help matters that there is no customer service. It's mostly trial and error to get it up and running properly.
Aboggs
05/03/2012 07:32 pm
This is why comapanies like RevLocal are becoming very popular.