Base64img takes a MATLAB figure and encodes it as a JPEG in a base64 string. This string can be used directly in a web page to display an image without an image file (in a subset of browsers only- 32 bit Windows and Linux).
Base64file takes a file on disk and encodes it as a base64 string.
Binod, IE6 does not support embedded base64 images, and in IE8, there is a character length limit on URIs so that is why you only receive a partial image. The only workarounds I've seen was to create a program to run on the server to take the encoded image and create a file out of it.