Thanks for your response, lots to consider.
Indeed there seems to be lots of valid reasons not to display remote images directly. Problem being; a potential member backlash if I take this functionality away. I was thinking of just having image uploads instead, like I have in other areas of the site. However, I'd need more server space and a solution for legacy content.
For now I've converted the site to https and the pages in the forum with non https images will just break the ssl lock. Since images are considered passive this doesn't seem to trigger warnings in IE etc. It seems a number of other large forums I looked at are doing the same, half assed solution.
I will put together a future project based on your suggestions.