Images refuse to display via archive.php – strange behavior.

I have a strange problem. I know my way around WP pretty good, but I am perplexed by the current problem.

On a site I am developing no images will display when viewing Categories. In fact, the archive.php file is identical to the index.php file, and I am calling for the_content() in both. If I delete the archive.php file and rely only on the index.php to display the category posts, STILL no images displayed.

What makes this really strange is that when I view the source code generated by the archive.php file I see the image in the code, but it simply does not display in category.

Any help or suggestions, other than pulling out my hair, are appreciated.

Thanks.