My guess is you are using Internet Explorer, correct? I can see your image on the main page of your blog just fine in Firefox. There is a known issue with IE not displaying an image if no width or height is specified. In looking at your source code, the width and height are not showing up:
<img src="images/20080906110855_sea stallion .jpg" alt="Viking ship ends two year voyage " title="Viking ship ends two year voyage " width="" height="" id="photo" />
Open image_template.html in your theme in a plain text editor, and look for the following code:
<img src="images/<IMAGE_NAME>" alt="<IMAGE_TITLE>" title="<IMAGE_TITLE>" width="<IMAGE_WIDTH>" height="<IMAGE_HEIGHT>" id="photo" />
Make sure that the <IMAGE_WIDTH> and <IMAGE_HEIGHT> tags are there. If not, add them and upload that template file to your server.
Then log into your PP admin section, go to Options and check your image paths - they should be as follows:
../images/
../thumbnails/
If they're not, then fix that issue and save.
Now check your blog in IE again - the image should be there now.
Hope this helps! :)