Here's a function I've developed for my site, you might want to use. It's based on your answer above.

It does other things not only the image processing - please remove everything which is unnecessary.

<?php

$thumb_width    = 500;
$thumb_height   = 500;

if ($handle = opendir('to-do')) {
    echo "Directory handle: $handle<br />";
    echo "Files:<br /><br />";

    /* This is the correct way to loop over the directory. */
    while (false !== ($file = readdir($handle))) {

        if ( ($file != ".") && ($file != "..") ){
            echo "$file";

            $original_path = "to-do/" . $file;

            $source_image = ImageCreateFromJPEG( $original_path );
            $thumb_width = $thumb_width;
            $thumb_height = $thumb_height;

            // Create the image, of the required size
            $thumbnail = imagecreatetruecolor($thumb_width, $thumb_height);
            if($thumbnail === false) {
                //creation failed -- probably not enough memory
                return null;
            }

            // Fill the image with a white color (this will be visible in the padding around the image,
            // if the aspect ratios of the image and the thumbnail do not match)
            // Replace this with any color you want, or comment it out for black.
            // I used grey for testing =)
            $fill = imagecolorallocate($thumbnail, 255, 255, 255);
            imagefill($thumbnail, 0, 0, $fill);

            // Compute resize ratio
            $hratio = $thumb_height / imagesy($source_image);
            $wratio = $thumb_width / imagesx($source_image);
            $ratio = min($hratio, $wratio);

            // If the source is smaller than the thumbnail size, 
            // Don't resize -- add a margin instead
            // (that is, dont magnify images)
            if ($ratio > 1.0)
                $ratio = 1.0;

            // Compute sizes
            $sy = floor(imagesy($source_image) * $ratio);
            $sx = floor(imagesx($source_image) * $ratio);

            // Compute margins
            // Using these margins centers the image in the thumbnail.
            // If you always want the image to the top left, set both of these to 0
            $m_y = floor(($thumb_height - $sy) / 2);
            $m_x = floor(($thumb_width - $sx) / 2);

            // Copy the image data, and resample
            // If you want a fast and ugly thumbnail, replace imagecopyresampled with imagecopyresized
            if (!imagecopyresampled($thumbnail, $source_image,
                $m_x, $m_y, //dest x, y (margins)
                0, 0, //src x, y (0,0 means top left)
                $sx, $sy,//dest w, h (resample to this size (computed above)
                imagesx($source_image), imagesy($source_image)) //src w, h (the full size of the original)
            ) {
                //copy failed
                imagedestroy($thumbnail);
                return null;
            }

            /* Set the new file name */
            $thumbnail_file_name = $file;

            /* Apply changes on the original image and write the result on the disk */
            ImageJPEG( $thumbnail, $complete_path . "done/" . $thumbnail_file_name );
            unset($source_image);
            unset($thumbnail);
            unset($original_path);
            unset($targeted_image_size);

            echo " done<br />";

        }

    }

    closedir($handle);
}

?>