[i]Are the thumbnails "generated" realtime from the images each and every time a browser pulls up a page?[/i]
No, they are generated once and then cached. If the display is still slow it might just be the server or the connection that is. There is also a html cache plugin that you might want to try.
Besides the fact that 1.2.8 is not the current release and the theme is not supported the rating function itself may slow down the display, especially if it is loaded for each item on the page since it generates JS and form elements for each item.