Prior to Exchange version 1.15.2, the popup incorrectly warned that the image itself needed to be larger than 150 x 150.
There are two possible reasons that you have received this message:
Reason One: Your settings for Thumbnail sizes are below 150 x 150px in Admin --> Settings --> Media
Reason Two: Your server is not creating thumbnails when files are being uploaded.
You can confirm this by FTPing to your server and looking in wp-content/uploads folder to confirm that there are multiple copies of each file you have uploaded (each with a different size).
The most common reason for thumbnails not being created when you upload photos to WordPress is because your hosting provider hasn't enabled the php_gd extension. You will need to ask your hosting provider to enable this if you want to use the Exchange Product Gallery.