Nothing wrong as far as I can tell. I put one of my own "dds" dialog huds in the same directory. Set up an unarmed tommy on the ground put in the marker and tested. Works perfectly.
See code and you will see I only changed the image file name.
Maybe it's the actual image file. Perhaps you should retry creating the image. That's where I first had problems.
;Header
desc = game conversation show one screen once only no sound
;Triggers
:state=0:hudreset,hudx=50,hudy=50,hudimagefine=gamecore\huds\j_l1a1.dds,hudname=img1,hudhide=1,hudmake=display,state=10
:state=10,plrdistwithin=160:rotatetoplr
:state=10,plrdistwithin=60:rotatetoplr,state=20
:state=20,plrdistwithin=60:rotatetoplr,hudshow=img1,hudfadeout=img1
:state=20,plrdistwithin=60,plrusingaction=1:state=40
:state=20,plrdistfurther=60:state=40
;End of Script
Edit:
I don't know why but when I posted the code the first time it left out the slash to delimit the path name. Odd! Hopefully the edit will fix this. Otherwise you'll wonder why this would even work.