Most of the banking websites that do this also remember information about your browser and IP. If it's a new computer, you're required to verify the computer before they show you the image.

It is a simple man-in-the-middle attack. The proxy will forward the username and echo back whatever it receives from the bank.

The reason it might work in this case is because the assumption is that people will only verify the browser bar when they first arrive on the page, and not when they have been "tab nabbed" like this

Correct.

Plus, the secret image assumes I actually remember which image I select for every page. Given that none have the same collection of images, I'm likely to have only a vague notion of which one I picked at account creation.