Check if the picture source is right, if there is no picture then it appears grey. Also, some effects only display when they are uploaded to the web. If you have all your pictures linked right, click on preview in browser instead of just clicking "Preview". I just tried it and it works for me.
I tried to use banner ads in Frontpage to fade in (& out) a series of pictures. When I preview it (or publish it) all I see is a grey box. Any ideas?