I tried to create an image thumbnail from the large image using GD, but got memory limit issues, using shared 1and1 server. (would imageMagik use less memory?).
This is could be a permanent roadblock, I think, unless this host allows you to change the PHP limits via .htaccess.
While you can up the PHP memory limit, max file size and timeout settings either system wide via the php.ini or a per-directory directive in .htaccess, the shared host may not allow you to do so. You'll have to experiment.
Per ImageMagick: The answer is yes, it will use less memory, but this is only server-side, not on upload. If this host has ImageMagick/Imagick installed, you have a shot at it. Run a phpinfo() in your domain to see, it will clearly show Imagick and all the installed libraries for it if it is.
These file sizes are ridiculous for display in web pages (or, if they are just downloading them, good enough.) You'll need to resize them for display, and road block #2 for you is that the GD toolkit needs to reconstruct a bitmap
version of the image in memory. So let's say you have a compressed .jpg you want to size to something reasonable for display. GD creates an uncompressed bitmap in memory, and this virtual file will be exponentially larger than 12 MB, maybe over 100 MB depending on the compression of the original. Add to that it still needs memory to do the resizing. Since memory is something that affects all users in a shared environment, this is why I say the host may not allow you to alter the PHP memory usage.
ImageMagick does a lot of this stuff in a virtual memory file, on disk, and seldom sucks up so much memory when resizing images, so yeah, when dealing with big images, it's the way to go. Fortunately he/she is using FTP to upload the images, you won't need to worry about the max upload sizes or timeouts, which would still be an issue if you're using a web-based uploader.