You need to binmode STDOUT and IMAGE, and add error checking

print "Expires: Fri, 30 Oct 1998 14:19:41 GMT\n";
print "Content-type:image/png\n\n";

open IMAGE, "e:/image1.png" or die "ERROR $!";
binmode IMAGE;
binmode STDOUT;
my ($image, $buff);
while(read IMAGE, $buff, 1024) {
    $image .= $buff;
}
close IMAGE;
#binmode STDOUT; #tried this with no success as well
#print STDOUT $image; #tried this with no success as well

print $image;
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