tedster - 9:11 pm on Dec 16, 2012 (gmt 0) [edited by: tedster at 9:26 pm (utc) on Dec 16, 2012]
At the end of November, Google changed their SafeSearch handling. They went from three levels (SafeSearch could be "Off", "Moderate" or "On") to just "On" or "Off." Sounds like you were caught up in this change - from what I hear a lot of people who care about image search were. No more moderate filtering.
I agree very much about the problems that can come from other sites hotlinking - so it's good that you've got it blocked. If you think back over their history, it took Google Image Search a long time to get things even close in this area. The hotlinking sites were often given top ranking rather than the originating site when "Moderate" filtering was the default.
Now, there is no more "Moderate" and I think hotlinking might be a real problem generating false positives in SafeSearch "On" filtering.
It might be worth checking your logs to see if anyone is still hotlinking even though you've got it blocked with .htaccess. I'm not sure what steps you could take if you find that happening, but I can see how such hotlinking might confuse Google - they don't see your .htaccess file, after all.
[edited by: tedster at 9:26 pm (utc) on Dec 16, 2012]