im using 4.1 and it works perfectly, all you have to do to incorporate new changes is to change {$URL|escape} to {$link_data.URL|escape} and all should work, full code (if needed) is
<img src="http://images.shrinktheweb.com/xino.php?stwembed=1&stwaccesskeyid=[key]&stwsize=lg&stwurl={if $smarty.const.ENABLE_DISPLAYURL and $DISPLAYURL ne ''}{$DISPLAYURL|escape}{else}{$link_data.URL|escape}{/if}" alt="{$TITLE|escape}" border="1">