FR less responsible for the content of the image if not stored on their servers. That’s what I always thought.
not only that, providing a link or hot linking to an image is way cheaper than storing it.
also, a major problem exists with hot linking: verifying the image can even be displayed @ FR.
It would be a nightmare for FR to store images, as they would have to be reviewed as a go\no go. based on at least this list
http://www.freerepublic.com/focus/f-news/1111944/posts
Then what about duplicates that may be named slightly different?
Easier to deal with links from other sites, than storage and maintenance costs.