I first noticed this on my BB Torch, but the same issue exists when resizing a Firefox window on my desktop PC.

I've set up a test webpage with 2 identical images that currently (until fixed!) illustrates the problem.
Only difference is whether a Caption is entered for an image....
http://www.terrencewalters.com/wordpress/test/

Open the link in a separate tab and shrink the browser window below 640 pixels, right down to 300 px.

No caption: padding re-centers with image OK and stays locked at constant padding size around image when browser width is less than image width; body text continues to re-wrap and stay centered

Caption: padding re-centers with image until browser width is less than image width, at which point padding continues to "shrink" with browser window (now padding crops under image)

This really isn't a problem on desktop browsers where the width won't usually be smaller than the width of "smaller" pictures, but it will affect any browser window that is smaller than larger pictures.

Blackberry Torch 9800 screen size is 480x360 px - ideally I'm hoping this glitch can get fixed so that mobile browsing is sweet perfection.

Any suggestions welcome - thx!

Have you tried checking it out in twenty-ten to see if it is a theme or wordpress issue?

Juggledad - sensible advice, however...

I'd already tried a couple of different themes but difficult to compare since anything I tried were not functionally equivalent.

At your suggestion, I specifically tried Twenty Ten on my desktop but again, it's not valid to compare since Twenty Ten is a fixed-width theme.

I'll have to look for something more similar to Atahualpa.

Flexible Width Themes

Life is Simple 1.3.4

• Different centers - image with caption is significantly closer to left
• At full browser width, padding is complete ...including right side (unlike missing padding when using Twenty Ten)
• As browser width shrinks, both images and padding recenter OK but captioned image is closer to left and stops recentering, then loses padding on both left and right sides. Images then lock to minimum size.
• Body text wraps somewhat.

So this theme is a little better than Twenty Ten but still not "apples to apples" and looks like it's got it's own bugs.

Suffusion 3.9.6

• Both images have same center
• Padding is not visible (might be a toggle somewhere in theme settings but I couldn't easily find it) but caption does show OK
• Both images shrink as browser width meets image size, then images both compress with browser window
• Body text wraps perfectly

So, this theme appears to be more of an "apples to apples" test, but I still cannot verify the padding problem that's evident in Atahualpa.

Toolbox 1.4

• Opposite problem of Life Is Simple in that the non-captioned image is closer to the left
• No padding visible
• Both images shrink fine and body text wraps fine.

Mantra 1.6.6

• Content width cannot be less than 550 pixels
• Padding shows OK
• No resizing of images as browser width changes

....heh! So my options appear to be:
Stay with Atahualpa and remove captions from all my images
Use Suffusion that shows captions but no padding
Use other themes that have their own odd bug/behaviour

Considering the results, I'm leaning towards this being a bug in the theme, not WordPress, but it's still not conclusive.

FWIW, I'll stick with Atahualpa since I like the look better than most I've found.

I noticed something else when testing on my Models page
http://www.terrencewalters.com/wordpress/models/
For images with captions that are embedded at Original Size, the caption resizes perfectly with the image, but for images that are embedded in a size other than Original (e.g. Large, Medium...), the resizing but shows up!

Not sure if that helps you guys confirm whether this is a theme bug or not....

So does this need to be tracked/posted anywhere different as a bug?
Not sure whether Devs monitor these posts....

Any progress on this?