Because Google now allows hosted files with a directory structure from Google Drive, I have updated this script to utilize Google Drive. You no longer need Dropbox or any other hosting solution. Also, you no longer need to name your images with numbers. The script will find any image file with any name. You just need to make sure you type the name correctly, enclose it in double square brackets and include the extension.
The setup is minimal.
1. At the top level or root of your 'My Drive' (by top level I mean not inside any other folder) create a folder called 'GFWI'. (Don't type the quotes!)
2. You need to make this folder public.
3. Inside of GFWI, create a folder called 'img'. (No period or quotes!) This is the folder where you will upload all of your images. An added benefit of this new system is that you can use the same images for multiple forms.
4. Open up the view only copy of this spreadsheet. (goo.gl/F5gL4)
5. Click "Yes, make a copy".
6. On your own copy click Form -> Edit form.
7. Create a form as you usually would. Where you want an image to appear, just type the image name enclosed in double straight brackets. For example [[myimage.jpg]]. You should be able to include images anywhere in the form.
8. After saving and closing the form editing window, go back to the spreadsheet and click 'GFWI', then select 'Create Form with Images'. You will have to authorize the script the first time you run it from a spreadsheet.
9. That's it! A link to your form should pop up.
Here is a video that Brian Weinert created demonstrating the process. Thanks Brian!
If you have any troubles, please let me know here or on Google+.