Arg, I’ve figured it out: in case anyone else runs into this. My problem was with Adblock Plus. The EasyList filter subscription included a “*” in the filter, filtering out ALL images. If your Firefox isn’t showing images and you have Adblock, look in Adblock Options for the “*” (solo). To fix it, disable that “*” filter by clicking the green Enabled ball. (A checkbox would be more logical, but whatever.) Other troubleshooting, try disabling Adblock and/or all extensions to see if that is the problem.
UPDATE (Feb 24, 2007): If you are using parental control software (Cybersitter for example) see rick752’s comment below, he says that Cybersitter (and maybe others) corrupt Adblock Plus filters, and suggests whitelisting adblockplus.org in the parental control software, see his comment for details.