Works fine on 4.1.10 using secondary groups and the following code in place of the outlined code.
Code:
<vb:if condition="is_member_of($post, xx)"><img src="images/misc/army.gif" border="0" alt="" /></vb:if>
<vb:if condition="is_member_of($post, xx)"><img src="images/misc/navy.gif" border="0" alt="" /></vb:if>
<vb:if condition="is_member_of($post, xx)"><img src="images/misc/airforce.gif" border="0" alt="" /></vb:if>
<vb:if condition="is_member_of($post, xx)"><img src="images/misc/marines.gif" border="0" alt="" /></vb:if>
Replace xx with your secondary usergroup number.