Do you have a css style defined for the img id ‘capt1’
Also, I'm not sure how the php file naming conventions work in Form Toolkit, but other forms built using the Form Builder 2 extension create php files with the camel case naming convention. I noticed your code reference to ‘captchasecurityimages.php?’ is all lowercase, as opposed to ‘CaptchaSecurityImages.php?’ as FB2 generates.
I recreated the same scenario in one of my forms by changing the php file reference in my markup to all lowercase, then uploaded to the server. Got the same results you're seeing with your form - missing captcha image. Try checking how the php files are named in your directory. I could definitely be wrong, but just another avenue to explore.