When I install the app on my iPhone, all local images are broken. Strangely, when I launch the project in xcode and install it using Debug (instead of Release), the image show up fine. Images are also fine in simulator.
Are you using xcode to launch it on your device, or Titanium? Titanium does some copying of images, which is needed to have them shown up on device.
I found that, while I prefer Xcode to run on my device, I first need to do "run on device" from titanium, to have the files copied. After that I can use xcode to compile and run, but the first time (after adding images, etc), I do need to use titanium.
This supposedly changed in Titanium 1.3, but I haven't looked at that yet.
Chris I was getting the same problem. I've found that since going to 1.3 SDK that I've had to manually copy the contents of the 'Resources' directory into ../build/iphone/Resources.
Then when I build to run on device in Titanium the images work. Hope this helps. A possible bug in 1.3 SDK I think?