I am having the same problem with the captcha code not showing up in a joomla 2.5 install. I've checked the GD in my control panel and it gives me the green light that it is compatible:
bundled (2.0.34 compatible) with FreeType Support
I also installed aicontactsafe on a new site just two days prior to the one I have trouble with, and it works fine. no problems. I basically kept everything at default on both installs. I checked both set ups side by side to see if I had mistakenly changed something,but didn't notice any difference.