Hi Gaius,
I tried to display an image from DB the same way you did. I used pictures from both the OutSystems sample Employees module and the OutSystemsSampleDataDB module. It seems to work fine for me.
So this makes me think that the images saved into your DB are somehow not readily available to be shown in an image widget, when type 'binary' is selected. Maybe the binary file is corrupted? Have you tried using binary images that are known to work well with the image widget (e.g. from a sample DB)?
Also, what does it show when you try to open the img src url in a new tab, again a broken image?
I realized that in your developer tools screenshot, the url in the img src is somewhat different than what I have in my img src. Mine has an extra _BinaryContent part:
