To recover from Time Machine try recover the whole Library, rather than just specific images.
To create and populate a new *iPhoto 08* library:
Note this will give you a working library with the same Events and pictures as before, however, you will lose your albums, keywords, modified versions, books, calendars etc.
In the iPhoto Preferences -> Events Uncheck the box at 'Imported Items from the Finder'
Move the iPhoto Library to the desktop
Launch iPhoto. It will ask if you wish to create a new Library. Say Yes.
Go into the iPhoto Library (Right Click -> Show Package Contents) on your desktop and find the Originals folder. From the Originals folder drag the individual Event Folders to the iPhoto Window and it will recreate them in the new library.
When you're sure all is well you can delete the iPhoto Library on your desktop.
In the future, in addition to your usual back up routine, you might like to make a copy of the library6.iPhoto file whenever you have made changes to the library as protection against database corruption.
I am in the process of rebuilding my library as you suggested from the 'show package contents'.
I am rebuilding on another EHD as I don't have enough room on the desktop.
As for accessing photos in time machine, I couldn't get to anything. I must have been doing something wrong. I clicked on 'browse backups', and it went into timemachine. I could move up and down the dates on the right hand side but couldn't actually click on anything.
Not sure where i went wrong.
Anyway, when I've finished rebuilding the library i'll let you know how it all went.
Thanks for your time and help.