The login feature - That's because in the options of the user manager of joomla (in the configuration of joomla for 1.5), you deactivated the user registration. Enable it and it will work.
Cant Upload - If you had a problem with the upload of the hikashop package which is only 1.5M, no wonder that it doesn't work for images... Your hosting company should be able to help you more than us sort out the problem, whether it's a php setting issue, or an access rights issue (joomla might not be allowed to write the uploaded files in your folders because of their permissions).