I was using firefox and so I tried in IE and it was working. So I went to Firefox Internet Tools/Options/Content and found there was an option to load images or not and when I went into the exceptions button I found my localhost as well as another client I haven't worked for in a while had their urlisted as those web urls not to display images for. When I removed them from the exception area, the images are appearing again.
I don't like using IE, Firefox seems to get bogged down less frequently, however, I still have problems with the jquery lightbox part of the local website. It will not start the iframed lightbox correctly, I have to open up another gallery before it works correctly. I'm sure it's the environment on that one.
Thanks for you reply.