There are several "caveats" about the code:

• no strict
• no warnings
• no use of $! in error messages...
• the function 'BINMODE' is not defined.
• you should(must on windows) use binmode() for input and output-handle. Ouput handle is STDOUT

This is how i'd write it, which doesn't mean it's right, but as recommendation:

#!C:\Progra~1\Perl\bin\perl
use CGI;
my $co = CGI->new();

open IMG, 'picture.jpg' or die $!;

binmode IMG;
binmode STDOUT;

$/ = \ 256; #or bigger as you like it
print $co->header('image/jpeg');

print while <IMG>;

close IMG;
[download]

update: there's no strict and warnings in my code either, so don't use it without inserting them!

--
http://fruiture.de

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