While using PHP 4.0.5 Win32 binary distribution, it works fine. With PHP 4.0.6 script fails with error like this "can't find arial.ttf in script d:\doba\www\test.php line X". Here is a short test script:

<?
$im = @ImageCreate(160, 45)
    or die ("Cannot Initialize new GD image stream");

$background_color = ImageColorAllocate ($im, 255, 255, 255);

$text_color = ImageColorAllocate ($im, 21, 106, 160);

// arial.ttf should be placed in the same
// directory with this script

ImageTTFText($im, 27, 0, 46, 36,  $text_color, "arial.ttf", "TEST");

ImagePng($im);
ImageDestroy($im);

?>