there are two things happening. The first is that you are using Forms Authentication and you don't have permission to view the file crystalimagehandler.aspx. You have to modify the web config file to make this accessible.

The second reason is that the app was deployed manually and not using with the merge modules. The files were not deployed correctly and you have to either move the files to the GAC or copy them to the same virtual directory as crystalimagehandler.aspx. You are clearly using the merge modules, so this probably isn't your issue.

 

The KB articles are here:

 

 

 

A third problem I've seen, although I can't find any KB articles on it, is that the virtual directory that stores the images never gets created. As mentioned before, this can happen during a manual installation. To fix this you need to create a folder within the Inetpub/wwwroot folder called 'CrystalReportWebFormViewer2'. Copy from the development machine the file in the Viewers folder (and its subfolders). This is found in the Crystal Reports folder of the MS.NET Program Files installation location. After creating the folder and copying the image files over, make it an IIS application by right-clicking on it and selecting Properties. Then click the Create button. Now you ASP.NET application will be able to use the virtual directory to display the images on the report.