Upon import of a user's profile (from AD), the user is still not recognized as a 'bonafide' SharePoint account until they actually login (authenticate) to the SharePoint site. Consequently, if you're attempting to write code that iterates thru a group of users and programmatically sets their profile image - that code will fail for any user who has not logged into the SharePoint site (and will throw the infamous 'User Cannot Be Found' exception). I stumbled onto this issue when working with a new MOSS site, so most users had not yet logged in. I resolved the issue by calling SPWeb.EnsureUser(username) - (
http://msdn.microsoft.com/en-us/library/microsoft.sharepoint.spweb.ensureuser.aspx) before attempting to access the user object. This method requires elevated permissions to run.
Happy Coding!