Apologies for my late reply; I wanted to get the SMTP installed just in case that might fix the problem. But it didn't.

1) The log shows NO errors about this.
2) I have NO mods installed.
I should add that even when I DISABLE max width and min width of images in Features and Options, it makes no difference!
Also, the package manager to upgrade to 1.0.9 didn't work for me -- connection would time-out, so I had to do it manually. I wonder if this is connected to the problem? Certainly in both cases, the server sends out an unsuccessful request.
This is killing me -- all the images make the forum hang and make loading pages SO SLOW.
I think it must have SOMETHING to do with having switched servers, but since everything else is working fine now, I can't figure out what that might be.
Here's one member's insights on the issue:
Regarding posting of image references in the img tag, it's pretty clear to me what's not working: It seems not a timeout but a failure of a connection being initiated from the forum server.
I'm really baffled about this -- I found a similar topic someone created in 2005, and no one could help him either, which scares me...
