What about the pages that contain the images? Are they still in Google's index, and if so, do they still rank for their main keywords?
Yes, and yes at least as well as can be expected given that the site is pandalized. These pages do not rank as well as they used to, but they still rank for their names as long as the name is not a common keyword.
Do you mean you have hotlinking enabled in cpanel?
This question is ambiguous. Cpanel has a feature called "hotlink protection" which adds code to your .htaccess file preventing your server from serving image files in response to a request with a referrer string other than your domain (and other domains that you whitelist). I don't use this feature, as I prefer to write my own .htaccess code.
About a year ago I used .htaccess to prevent hotlinking by redirecting invalid image requests to my licensing terms. This was a response to bandwidth spikes caused by hotlinking. I discovered, as did you (I read your posts at the time), that this interfered with the indexing of my images by Google, so I removed the code and purchased more bandwidth. Subsequently, my images returned to Google image search, and have been in it up until the beginning of this April.
Currently I have no restrictions whatsoever on access to my image files, either in .htaccess or in robots.txt. I am not using a framebreaker script or doing anything else that I know of that would interfere with Google image search in any way.
The one image that is still in image search shows up just fine and can be downloaded from the popup that appears in the image search results.
I can think of three possibilities:
-My webhost may have done something to prevent bots from downloading my images as a response to scraping. However I went to Google webmaster tools and told it to download an image as googlebot, and that worked fine.
-I am using some unusual CSS on the image pages. This was never a problem before, but maybe it is now. I can change that.
-I have incurred some sort of penalty, probably not related to Panda as nobody else seems to be reporting this problem. I'm actually kind of hoping this is the case, as it might explain the drop in traffic that I experienced in early April, which I thought was caused by Panda. Maybe if I can get this penalty lifted my traffic will recover, and it never had to do with Panda at all. Seems an odd coincidence though.