wow, that is decidedly crappy on their part. Good luck with finding somewhere to host them. If it is useful - I use Flickr, which appears to be absolutely fine. A little finicky with getting the code to link to them, but I don't think I've had problems (now I'm going to have to work out when I last actually put a picture in a DW post, and check!)

ETA: looks like my linked Flickr hosted pics are still working (see this post if an example is useful)