[MonoTouch] Adding Image with BuildAction Content prevents app from starting

[Aidan Reel]

Hi
[MT1.2:MD2.2RC]

Created iphone monotouch project.
Compiled
Run
Simulator kicks off and app appears on desktop.
App starts.
Quit app via home button.
Add folder to project
Add existing files to folder (some pngs).
selected one png and set Build Action in Properties to Content.
Clean build
Compile
Run

Simulator:  app  is deleted but not replaced with new version.
App does not start.

select same png file and reset Build Action in Properties back to  
Content.
clean build
compile
Run
App starts up.

MD shows Build successful in tag line and Application Output tab is  
brought forward.

Any one else have this behaviour?

Regards

Aidan