Ok, I'll give it a try. Delete all your controlls and do it on clear new ones.
MainPanel on a form - AutoScroll: True, Dock: Fill
SmallerPanel on a MainPanel - AutoSize: True
PictureBox on SmallerPanel - SizeMode: AutoSize
Don't change any other properties. Add a button, double click on it and edit the method
private void button1_Click(object sender, EventArgs e)
{
pictureBox1.Load("paste some img filepath.jpg");
}
There is no way it won't work.