Hi,
I don't see why updating Joomla would change anything.
The function ImageCreateFromPNG allows PHP to process PNG images.
That's provided by PHP, not Joomla.
If that function ImageCreateFromPNG doesn't exists, HikaShop cannot generate thumbnails out of png files.
That function is a standard function of GD so make sure that your server supports it or it won't work.
Commenting that line won't help as that function allows the system to convert the png format into a PHP image in memory and without it, the system won't be able to handle thumbnails of png files at all.