Update, actually it turned out my old laptop had IE 8 and I am able to reproduce the problem. However I have no idea what is causing it or how to fix it, there are no script errors and no obvious cause of this. The Flickr Gallery was based on this plugin demo and the same result happens when I visit that page with IE 8.
So at this point all I can do is acknowledge that this feature does not work correctly in IE 8. I guess IE 8 is the new IE 6, the bane of every web developer.
Sorry that I don't have better news on this at the moment. My recommendation is for everyone to upgrade to the latest version of their web browser.
Best,
Joe