Wait, image links are converted to hosted images? Did you hear the ruckus about one search engine removing View Image link because one stock photo company complained about copyright infringements?
Also, does it obey no-cache, must-revalidate or max-age directives? And why images but not videos? Same principle would apply, avoid broken posts. And same legal issues, caches/proxies are different thing than hosting.
It’s a tricky thing, one side the legal aspect, other side the fixing aspect (updating a picture means hunting down all places where it was posted and then auto-copied), another the linkrot. Probably more.