Header images NOT displaying throughout Multi-site network!!

Please help,
All the header images throughout my multi-site network have disappeared!!
(*multisite example*: http://www.beyoutifulthoughts.nuwshop.com)
When I right click the banner and inspect the element, the directory is trying to pull the file from domain/files/2012/09/filename.jpg
However, when I go into the FTP I see the image in
rootdirectory/wp-content/blog.dir/31/files/2012/09/filename.jpg

Why is the header image not pulling through on the sites?
We are using the latest version of WP, and I read a few forums where it was mentioned that WP is no longer pulling from blog.dir.
Could that be the problem?
I've been looking into this all day, and still no result.

Please advise ASAP!!

Thanks in advance!