Hi! :)
Do you really get the dotted outline if the image isn't linked? If it really is the focused link outline you are talking about it's possible to get rid of it with JavaScript in IE. I don't think you should though, since it's an accessibility feature of the browser. Tabbing through links without it is no fun. I use it constantly even if I use my mouse most of the time.
I don't post a script because I don't know an unobtrusive one off the top of my head (the worst ones disable keyboard navigation altogether). If no one else posts one, you can try to google something like this:
http://www.google.com/search?q=javas...es+dotted+line
If I guessed wrong, please give us more details. The code you posted doesn't give any kind of border on it's own.
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http://yupapa.com