Hi Suzanne - I'm using OS 10.2.6 and the latest Safari as well and I hadn't noticed the "error404" weirdness before, but since you mentioned it, I tried it and get the same error message.
I tried in this forum and also a couple of the challenges and got the same message when I use the "Download image to disk" option.
The "Copy image to clipboard" option works and you can then paste the image into PhotoShop.
Doug, I don't know when this started because I have been able to download images in the past with no problem. I don't keep a cache in the browser and I tried with images that I have never looked at before.
I was able to download some images from another site with no problem.
I'll put in a bug report to Apple and also post a question on an Apple web developers forum and see if they have any suggestions.
Interesting
Margaret