Hi @SkeenP_,
I just tested with your PNG you provided and with version 3.13.229 on iPad Pro with iOS 14.7. However I am able to select the image and it gets successfully added to the survey as a PNG with the Photos option (it gets renamed to the question name which is expected). I am not seeing any issues with PNG files (see screenshot below). Also tested Windows and android version of the field app, and worked correctly to with PNG files.
The resizing appears to be working to, my survey is set to an image size of 1280, your original PNG is 2224x1688, after I attach it to the survey I can see the attached image is 1280x960, which is correct.
I noticed in your video you add a log file to an image question with the file option, and then try to add an image file, without deleting the log file attachment first. Can you try selecting the PNG as the first image?
And just to double check, what version of iOS are you using, and on what device model?
Regards,
Phil.