Oldest known Shiva image (non Shiva-linga ) is again ( akin to Krishna & Ganesha) not in sculpture but in numismatics of the Indo-Greek & Kushan period. In Kushan coins, the legend always reads OESHO , not Shiva though( http://coinindia.com/galleries-vasudeva.html )

Thanks Ratnesh!

For linguistic evidence ( including the Rg veda Rudra description), in " The presence of Siva", the Indologist & sanksrit scholar Stella Kramrisch , presents excellent detail.

But is this earlier than the Lingam at Gudimallam?

Gudimallam is likely earlier than the Kushan coins but its contemporary with Indo-Greek coins. Gudimallam is a Shiva-linga though ( thats why I stressed on the coins being the earliest non Shiva-linga, in my comment above). Also, the Gudimallam carving on the Shiva-linga doesn't completely fit into the Shiva iconography as we know it today ( and as shown in Kushan coins). This blog comment from Vijay has a good explanation ( http://poetryinstone.in/lang/en/2013/03/06/iconography-of-an-early-siva-lingam-gudimallam )

Beauty

Very beautiful !!!