Assuming that you are correct and the plugin is working correctly, and it is just a coincidence that before I upgraded to v. 1.6 the plugin worked, but since I upgraded over a week ago it has never worked in dozens of attempts, I think it is a bit rich to describe it as "detecting if the service [Sumsh.it] is down and gracefully handing this error condition".
There is nothing graceful or particularly informative about "Operation timed out after 20000 milliseconds with 0 bytes received" except telling me something I already knew; my images were not been Sumshed.
It would have been nice if we had been told that "The problem is that Yahoo's smush.it service is not 100% available" which does tell us something useful.
Actually, from my experience, the service has been available 0% of the time for the past week. An amazing coincidence, assuming the plugin is working correctly!