(Not a Twitter user). Isn't it in Twitter's best interest to keep Twitpic around? From a strictly business point of view, why don't they squeeze them, then buy them for pennies an integrate them into their own service?

Edit: or just scrape all the images, put them into their own service, then cut them out?

Could be a talent acquisition (not saying that's likely to be the case, just an example of why someone would buy them even with a poor business model).