Rob:

You've got some general problems with your program design.  First, all
drawing should take place in the paint() of AWT components or the
paintComponent() of Swing components.  I know that this is
counter-intuitive but it has to be or your program will not be able to
repaint itself when another window is placed over it and removed or it
is minimized and then subsequently maximized.  So draw your image in the
paintComponent().  To change images start a thread in your
actionListener that downloads a new image and then call repaint.  The
reason to start a new thread is that you want your GUI to be functional
while the image is being retrieved.  If you wait in your actionListener
you are blocking the EDT and none of your GUI will redraw or respond to
input.  Also unless you need to use an out of date JDK, forget the
Toolkit.getImage().   Use the ImageIO.read() instead.  It is synchronous
and is much simpler than getImage().

Here is a simple example of what you said you wanted to do.  Replace the
image file name with something you want to see.

import java.awt.*;
import java.awt.event.*;
import java.awt.image.*;
import java.io.*;
import javax.imageio.*;
import javax.swing.*;

public class ImageTest extends JPanel {
    BufferedImage image;

    public ImageTest(BufferedImage image) {
        this.image = image;
    }

    public void paintComponent(Graphics g) {
        // if there is no image yet draw the message instead
        if (image != null)
            g.drawImage(image,0,0,getWidth(),getHeight(),null);
        else
            g.drawString("No Image Loaded!",20,getHeight()/2);
    }

    // this method is used to change images
    public void setImage(BufferedImage image) {
        this.image = image;
    }

    public static void main(String[] args) {
        // all Swing apps should be created on the EDT
        // do your GUI creation in a static method (in this case main)
started
        // on the EDT with EventQueue.invokeLater()
        Runnable r = new Runnable() {
            public void run() {
                JFrame f = new JFrame("ImageTest");
                f.setDefaultCloseOperation(JFrame.EXIT_ON_CLOSE);

                // itest is final so that it can be seen in the
actionlistener
                //  of the button below
                final ImageTest itest = new ImageTest(null);
                // set the preferred size so the layout manager knows
how big
                // to make your component
                itest.setPreferredSize(new Dimension(400,300));
                f.add(itest,BorderLayout.CENTER);

                JButton b = new JButton("Load Image");
                f.add(b,BorderLayout.NORTH);
                b.addActionListener(new ActionListener() {
                    public void actionPerformed(ActionEvent ae) {
                        // start a new thread to get the image so that this
                        // method will return immediately
                        Runnable r = new Runnable() {
                            public void run() {
                                try {
                                    // you can use a File, URL or
InputStream
                                    // as the source of an image with
ImageIO
                                    BufferedImage bi =
                                     ImageIO.read(new File("saturn.jpg"));
                                    // set the image you just read as
the image
                                    // to draw on your component
                                    itest.setImage(bi);
                                    // call repaint to tell the manager to
                                    // redraw the component
                                    itest.repaint();
                                } catch (IOException ioe) {
                                    ioe.printStackTrace();
                                }
                            }
                        };
                        new Thread(r).start();
                    }
                });
                f.pack();
                f.setVisible(true);
            }
        };
        EventQueue.invokeLater(r);
    }
}

Bzzzzt, game over. Your whole application architecture is wrong. Have a
look at the GUI FAQ for a start, and work through Sun's GUI and Java 2D
tutorial. Pointers are in the FAQ.

/Thomas

[...]

Have you considered using the ImageIO.read() method?
http://java.sun.com/j2se/1.5.0/docs/api/javax/imageio/ImageIO.html#read(java.io.File)

   - Oliver