I was wondering whether a image hosting site like imageshack or photobucket is allowed as it is not illegal and not mentioned anywhere in the TOS or rules.

Thanks for any help.

Yes, I don't see why not.

Yes, but we have anti-hot linking enabled, so an image host would be pretty pointless.

Is there no way to disable hot linking??

Well if people will just upload and view images on your site then it wouldnt matter. But if you want people to just upload and then link it to something else it will not work.