I had a feeling we might be running into an extra space when you initially said it didnt work. Lets try this to get rid of the space before the name of the image file, find this line...
PHP Code:
src="templates/{$smarty.const.MAIN_TEMPLATE}/images/{$category}.gif" width="633"
and change to this.
PHP Code:
src="templates/{$smarty.const.MAIN_TEMPLATE}/images/{$category|regex_replace:" ":""}.gif" width="633"