The URL format has never been advertised as the way to show graphics in your diary, as, indeed, its only intended to store background images, show reader comment buttons, hide reader comment buttons, next, previous and index buttons. Or in other words the kinds of graphics you can setup and use directly through the Customizer. Any other use of the private graphics area is not supported and (as has happened now) subject to change and not working.
The restriction is for two reasons; originally a technical one and, after the advent of the Premium Account, a financial one too. The technical reason is that the /userdata/ directory needs a major design change and so the URL's will all change again soon anyway. Of course, if the images are used through the proper channels then no-one will ever know how we store them on the hard disk - but by directly linking to them through an IMG SRC tag in your entry, it breaks any time we have to change it. If they're only used properly (as in the case of the album) then we can optimize and change the system underneath, completely transparently to users.
The financial reason is of course that there are over 100 people who are paying to support the bandwidth usage of the site... The others, that are linking directly in the private image area are effectively stealing the bandwidth from those that pay, which didn't seem particularly fair. And thirdly, as I said originally, it was never intended to be used that way anyway.
The only way to store photos or other kinds of pictures on the AtomIC servers, for viewing anywhere (not just on your diary) is through the AtomIC Album. We were made aware of a couple of instance of abuse through the private graphics area and removed it. Having done so we're now aware of possibly hundreds of other people who (presumably not knowing any better) were also using it to store pictures for their diary. If you want to put pictures on your diary, you'll need to use your own personal webspace (most dialup accounts or DSL accounts come with at least 10Megs of web space) or you'll need to look at the AtomIC Album.
Steve.