When you removed the xml did you also remove all files that came with the plugin
in postbit template change it to what i have below as you seem to have parts different
Code:
<vb:if condition="$show['reportlink']">
<a class="report" href="{vb:raw post.reportlink}" rel="nofollow" title="{vb:rawphrase report_bad_post}"><!-- <img src="{vb:stylevar imgdir_button}/report-40b.png" alt="{vb:rawphrase report_bad_post}" /> --> </a>
</vb:if>
Also check all templates for report.gif and change them to report-40b.png should be 6 templates in total image below