I know this is an old thread, but I was stuck on the same issue too. Looks like this plugin requires libGD (http://www.libgd.org/). If your php doesn’t include it (though GD is pretty common these days), then the number images won’t be generated. I was testing my site out of OS X Leopard, which doesn’t have libGD, but fortunately the server I’m moving the site to does.
Seems like this should be in the installation notes or FAQ somewhere.
The link above to download 0.3.2 keeps taking me to a page that says it “is temporarily down for updates”, and it has said that since last Friday. Is there an alternate link for this update? Thanks!