With windows that's pretty much the only way if using ImageMagick. If you get GD2 with freetype support compiled in, that it's not necessary, as it doesn't have to use cmd.exe at all. So this would work for both captcha and the gallery.
As for the original gallery problem, it looks like it's going to require a support ticket so I can actually login via ftp and do some debugging. If it's still set to use IM at the time the ticket is opened, then cmd.exe would need to have the proper permissions again.
