Google has finally cleared up the policy of having images near their ads, and here’s what they said:
We ask that publishers not line up images and ads in a way that suggests a relationship between the images and the ads. If your visitors believe that the images and the ads are directly associated, or that the advertiser is offering the exact item found in the neighboring image, they may click the ad expecting to find something that isn’t actually being offered. That’s not a good experience for users or advertisers.
If you read on, they continue to say that it is not acceptable, even if you put white space, or a line between the images and the ads.
So much for the Adsense Beautifier plugin. 🙂 Time to re-tweak some my blog templates.
So, how do you overcome your dramatic drop in you Adsense earnings when you take out the pictures? More traffic! 
For others, you might want to look less reliance on Adsense, like affiliate marketing, or better, get people paying money to you direct instead of going through Adsense. Its always good to explore. 🙂
I can see everyone leaving adsense that was the oldest and best trick in the book!
But affiliate marketing has always been a really good way too go you can actually make a substantial amount from some companies, or even better sell ad space.
Well, I just think it is important to know that Adsense is not the only way out. There are plentiful of other contextual advertising programs out there!