I have a similar issue since the switch to linked style sheets. It happens to be very minor in my case - the e-mail address (actually an image) on my main page has suddenly become squashed up against the left of the page in IE6. But the reason is the same - the padding on the IMG is being ignored. It was always like this in IE5 but I wasn't too concerned about that.
I think this page may be relevant:
CSS Enhancements in Internet Explorer 6.
In particular:
Padding properties, such as padding, padding-bottom, padding-top, padding-left, and padding-right, are supported on IMG elements. Earlier versions of Internet Explorer do not support the padding properties on IMG elements.
So it appears that padding on IMG elements won't work on IE versions before IE6. But if I'm reading the document correctly, even in IE6 it will only work if a DOCTYPE is used to switch on standards-compliant mode. As there is no DOCTYPE in PBase galleries, the page will render in 'quirks' mode, preserving all the flaws of IE5.
So it seems that applying padding to an image won't work in any version of IE as PBase now stands. But I must admit this doesn't explain how it used to work. The only thing I can think of is that somehow the positioning of the inline CSS affects the strict/quirks mode, but I don't really understand how that could be the case.
Sorry this doesn't really get you closer to a solution - other than the rather impractical one of telling all your page visitors to ditch IE and get a proper browser!