If a product does not have a product image in the file manager, is there a way to default to a "No Image Found" JPG as a place holder. It would look better than having the broken image there.
No not currently.
You will have to script it. When the element wrapper you may have is empty then insert the placeholder image. For the list views (small product layout) you loop through each element to check.
Alternatively you could set a 'no image' image as the background of a div that holds your image. If there is no image the background will show. Of course this all depends on how you have you layout set up.
Downside of that is laoding etc Brad.
You get to see "No Image" on slower loads or if you have a lot of products etc or when BC is slow to fetch from its media server side.
No ideal way but It is something easy solved in Liquid which I have messed with. Can not wait to use that for real.