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Free image hosting sites require a lot of work and a lot of bandwidth. While money can be made it's normally not worth it to justify the work and possible legal issues.
I used to run a VERY popular (read: 100k+ PAGE VIEWS per-day) that would make 20-30 a day butit was just so much work approving images, removing illegal content, etc. I just sold it off. I run 1 small image host now but I designed it for personal use and friends. Others use it but it hasn't gotten out of hand yet.
I plan to add some more features to it like no animated images (really take the bw). I already have custom hotlink protection with my own php image handler that saves butloads of bandwidth.
Do it for a hobby or fun but I wouldn't spend a lot of time doing it for money unles you can code/tweak it yourself.
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