Thanks to Tino: Hi Brankic,
I figured out the problem and thought I should pass it on to you for future support.
As you suspected, the problem was with my host. I am hosting with HostGator.com I found the following document from ElegantThemes.com site.
You have to contact technical support to “whitelist” the timthumb rule. This can easily be done with HostGator’s Live Chat. Once the rule for Timthumb has been whitelisted, the permissions need to be set.
*NOTE… CHMOD 777 permissions do not work on HostGator. Set the permissions on it to 755 777 permissions will never work on Hostgator as it creates a massive security hole. Folders require permissions 755 and files require permissions 644.
I set the permissions of the timthumb.php file to = 644
Then it worked!
Unfortunately, there was still the problem with your imported posts. They all point to your domain, brankic1979.com. Therefore, I went in and modified the timthumb.php file to include your external domain. This will get me by until I update the images to my own. Following is the code I edited in the timthumb.php file.
// external domains that are allowed to be displayed on your website
$allowedSites = array ( ‘flickr.com’, ‘picasa.com’, ‘blogger.com’, ‘wordpress.com’, ‘img.youtube.com’, ‘brankic1979.com’, );
Hope this helps.