My Facebook feed dialog link correctly renders a dialog page, but the image set with the picture parameter does not show up -- just the gray line that indicates no picture.<
Just in case some one still is looking for an answer. I found out that my domain had Hotlink Protection on, that's why it was stopping all images from directly being referenced. So in order for Facebook to reference my images directly, I had to turn off Hotlink Protection. Another alternative (better one, I guess) is only to add facebook.com as an exception to be able to hotlink your images.
My web host was Godaddy.