Whoops. Looks like I wasn't getting notified of new posts.
Just to answer a few questions-
Yes, imageshack has added ads to the uploader.
There is not much I can do about this. Currently it's just advertising their toolbar. Personally, these ads don't bother me much as I understand that they're necessary for ImageShack's survival and development as an internet service.
Yes, the uploader works on the new version of phpBB (2.0.21).
I just checked.
I just submitted I minor update to this mod for validation by the mod team. It is an extremely small change, just expanding the iframe box to prevent wrapping. Some users may still experience wrapping if they have manually adjusted the size of the text on the page (by ctrl and + or scrolling the mouse wheel.)