Ah, yes, they have backtracked on their TOS.
"including without limitation distributing part or all of the Site in any media formats through any media channels"
Yes, the amended ToS are very different to those originally quoted. However, I think the above clause would still give them enough wriggle-room to sell ("distribute") image licences if they so desired. The people behind Instagram may be paragons of virtue but I wouldn't trust any of these web-based corporations as far as I can spit. Plus, in Instagram's case, since they are part of the Facebook empire they now have some very heavy corporate and banking shareholders pressurising them for profits and share value.