Initial conditions: make sure that Tools/Internet Options/Advanced tab/Accessibility section/Always expand ALT text for images checkbox is checked
The preference "Always expand ALT text for images" will make the image placeholder expand to meet the required space needed for rendering the alternate text if and only if the user has unchecked the "Show pictures" checkbox. If an user has unchecked "Show pictures" checkbox, then it is *_highly_* reasonable and most likely expected from him that he would want the image placeholder space to expand as much as the alternate text requires, would expand to fit the alternate text.(1)
The same logic would apply to an user agent which can not render an image (network problem or markup coding error or inexistent image): the user would certainly want the image placeholder to expand as required to render the alternate text. In other words, that "Always expand ALT text for images" is unneeded, is pointless, is counter-user-friendly or never worked as expected for the user.
I am convinced that this "Always expand ALT text for images" setting never worked for users, as the users would expect such setting to work for them, not against them.
Alternate text for images: why image dimensions should NOT be preserved when an image is not shown 11 convincing arguments presented by Ian "Hixie" Hickson.
"4. For an object (e.g., an image) with an author-specified geometry that the
user agent does not render, allow the user to configure how the conditional
content should be rendered. For example, within the specified geometry, or by
ignoring the specified geometry altogether."
coming from Techniques for User Agent Accessibility Guidelines 1.0, section 2.3 Render conditional content (P1), Example techniques
reader of the page frankly couldn't care less if the author has made a
mistake and the page is not completely available. The reader wants the
information. So if an image is not available, the page should adapt. This
is what alt text is designed to do. Ian "Hixie" Hickson
Firefox 18.104.22.168, Firefox 3.x, Amaya 9.55, Seamonkey 1.x, Seamonkey 2.x, K-meleon 1.x, Galeon 2, Epiphany 2, NS 6.2, NS 7.0, NS 7.2 pass this test.