A generic error occurred in GDI+. Outputting image to response output stream giving GDI+ error

Some format needs to be saved to a seekable stream. Using an intermediate MemoryStream will do the trick:

using (Bitmap image = new Bitmap(context.Server.MapPath("images/stars_5.png")))
{
   using(MemoryStream ms = new MemoryStream())
   {
      image.Save(ms, System.Drawing.Imaging.ImageFormat.Png);
      ms.WriteTo(context.Response.OutputStream);
   }
}