Windows Phone 8 apps need to specify the ID_CAP_MEDIALIB_PHOTO
capability to access photos in the media library. After adding it to the WMAppManifest.xml it started working as expected.
As a side note, I have edited your post to remove the link to the project, as it contains dev assemblies, which are not publicly available. In case you need to attach a project, you can open a formal support ticket. This way you will be able to add private attachments.
Check out the Telerik Platform - the only platform that combines a rich set of UI tools with powerful cloud services to develop web, hybrid and native mobile apps.