Thank you all so much for your patience, support, kindness, and encouraging comments and emails!
I have heard from a Google contributor and it wasn't good news.
When images are uploaded from our computers to our blogs, they are hosted on servers at picasaweb. Our personal computers are not servers, nor would we want everyone reaching into our computers to find the image files. When pictures are deleted from picasaweb, they cannot be recovered. We have asked Google why there is not a grace period in deleting images like there is at Blogger when you delete a blog, but there has never been any positive response. There was a warning message when you did this, but you may have overlooked it. Your only recourse, if you wish to restore the pictures to the blog, is to edit posts and upload them again. That sounds like a daunting task, and it could very well be, but I suggest you start with recent posts and upload to them, replacing the pictures in a few posts at a time.
With that answer, I will follow along with the cliche saying and "keep calm and carry on". :)