I am unable to turn on the CAPTCHA image feature under Link Approval Settings.

This most likely means that Php's GD graphics library and/or the FreeType library is not installed on your web server. Contact your web host's tech support and request that they install the GD library and the FreeType library on the server - once they are installed you should then be able to use the CAPTCHA feature.

The FreeType library can be downloaded here:

http://www.freetype.org/