First, when you Grab or Snap an image in LabVIEW with the Vision utilities, you will have to use 16bit format. This is a big pain, and a serious waste of memory, but necessary. I strongly recommend that if you are doing any kind of image manipulation or processing, that you keep it 10bit.
Okay, with that said. To display the image, you need to go to the Picture Tools palette, NOT the IMAQ palette. There you will find the tools to open and display the PNG image. However; you should be able to read the image with the "Read Image File" VI, though as I have never done it, I cannot be certain. Either way, the Picture tools will get you where you need to be.