I accidentally upgraded to 1.0.1 today, and this fixed it. Anyway, I can report that 1.0.1 is also broken. Instead of showing up over the image when I hovered over it, the buttons just showed up at the top of my post without any hovering needed.
I installed WP Editor yesterday, but it would make the code insertion buttons disappear, and this was a deal-breaker for me. I’m currently using HTML Editor Syntax Highlighter, though it has some problems too.