works fine in my test.
check your image size and maybe add some print functions in the controller function to check.

The issue is that I'm calling the function within the scope of Images that I've setup with a many_many because of the SS bug.

Maybe use SS 3.0.1 RC2

I don't think it was fixed in that RC according to the change log.

It's more of a scope issue. I don't know how to call the function within the Image loop. I've tried $Top in some places, but so far nothing.

if you are in the loop, use $Up to move one level up in the scope. Which should make something like <% if $Up.greaterThan($Width, 800) %>
all the answers are here http://doc.silverstripe.org/framework/en/reference/templates

I had originally tried that with $Top and no luck. Same goes for $Up.

If I use your function outside of the Images loop it returns correctly

See anything wrong with this:

public function greaterThan($value, $reference) { 
		if ($value > $reference){
			return true;
		}
		else{
			return false;
		}
	}

<% loop Images %>
			<% if $Up.greaterThan($Width, 800) %>
				<a href="$SetWidth(800).URL" class="itemPhotos <% if MultipleOf(5) %> itemPhotosLast <% end_if %>" title="$Title">$CroppedImage(158,158)</a>
			<% else %>
				$Width
			<% end_if %>
		<% end_loop %>

I'm just putting $Width in the else block to see how it returns. It always returns false and I have images both smaller and larger than 800. I've tried $Up, $Top and at the front and end of the function just to test. Nothing works. Always false.

$Up seems to work fine on my setup.
can you attached your files, Model, Controller and Template?

Here is the php - http://pastebin.com/g0dMJL0w

Here is the template - http://pastebin.com/nH4N6uu4