How to have an image appear in python/pygame

Here you go. It blits the image to 0,0. Your other problem is that your pyimage doesn't seem to be built with png support

import pygame
from pygame.locals import*
img = pygame.image.load('clouds.bmp')

white = (255, 64, 64)
w = 640
h = 480
screen = pygame.display.set_mode((w, h))
screen.fill((white))
running = 1

while running:
    screen.fill((white))
    screen.blit(img,(0,0))
    pygame.display.flip()

Here is an image handling block that I use in my games:

import os, sys
...
-snip-
...
def load_image(name, colorkey=None):
    fullname = os.path.join('images', name)
    try:
        image = pygame.image.load(fullname)
    except pygame.error, message:
        print 'Cannot load image:', name
        raise SystemExit, message
    image = image.convert()
    if colorkey is not None:
        if colorkey is -1:
            colorkey = image.get_at((0,0))
        image.set_colorkey(colorkey, RLEACCEL)
    return image, image.get_rect()

You can copy-paste this in any game and it will work. os and sys need to be imported into your game or else it won't work.