[MiskaTorn]

Now this script works 100% for me, here is a list of changes I made.

Ok, I have made some more changes to make this work correctly.

This will make the install pull the template file correctly
In install\hacks\image_hosting\12\index.php line 93 and 109

require_once('./template_mods.php');

to

require_once('./templates.php');

This will display the image correctly when the viewer views the image they uploaded.
In install\hacks\image_hosting\12\templates.php line 139

  <td class="alt1" colspan="2" valign="middle" align="center"><img src="$images[i_image]" width="" height="" alt="$images[i_name]" /></td>

to

<td class="alt1" colspan="2" valign="middle" align="center"><img src="$images[i_image]" alt="$images[i_name]" /></td>

This will display the correct example for the path to enter.
In install\hacks\image_hosting\12\settings.php line 17

$setting['host_upload_dir']['descphrase'] = 'The full local path to the upload directory eg. home/user/www/forum/hosted_images/ DO NOT FORGET THE TRAILING SLASH';

to

$setting['host_upload_dir']['descphrase'] = 'The full local path to the upload directory eg. /home/user/www/forum/hosted_images/ DO NOT FORGET THE TRAILING SLASH';

Also on line 26 change

$setting['host_url']['descphrase'] = 'Set this to the directory where images are stored eg. /forum/hosted_images/ (remember the / at the end)';

to

$setting['host_url']['descphrase'] = 'Set this to the directory where images are stored eg. /hosted_images/ (remember the / at the end)';

This will entire the entire URL to the image into the database.
In image_host.php change line 136

$imgurl = $vboptions['host_url'] . $_FILES['img']['name'];

to

$imgurl = $vboptions['bburl'] . $vboptions['host_url'] . $_FILES['img']['name'];