Actual results in IE 7 and IE 8 beta 2:
Firefox 1.5, Firefox 2, Firefox 3, Opera 9.27, Opera 9.50, Safari 3.1.2, Konqueror 3.5.9, Hv3 TKHTML alpha 16, Seamonkey 1.x, Seamonkey 2.x, NS 7.2, K-meleon 1.x, Galeon 2.0.4, Epiphany 2.22, Amaya 10 (partial success) all pass this test.
Note: the user preferences should allow the webpage to be able to set the colors for links. E.g.: the checkbox Tools/Internet Options/General tab/Accessibility button/Ignore colors specified on webpages should be unchecked. Same thing for other browsers: in Firefox: Tools/Options.../Content tab/Colors... button/Allow webpages to choose their own colors... should be checked.
Credit must go to Rob Novak for discovering and describing this bug in IE bug concerning CSS and IMG tag post.
This bug has been reported at connect's IE beta feedback as bug 354312.
Update: This bug has been FIXED in Internet Explorer 8 Partner pre-RC1 build 6001.18343 released on December 11th 2008. Otherwise, Internet Explorer 8 Partner pre-RC1 build 6001.18343 PASSES this specific and particular testcase.