Well, the problem with allowing people to embed external images is of course that it risks them being broken, or replaced by porn ads after the free webspace expires and stuff like that and would make content control, including the no-adult stuff rule on ff.net much harder than it is now, so I can see why they don't allow external images. I'm fairly sure you can't upload pictures to ff.net itself. (I've an account for subscribing to updates.)

I think that AO3 has so few images is because they don't allow image upload yet either, so for me it makes no sense to use it as a picture archive when I can only use it to tag pictures, not archive them. I hope they'll get around to expanding to non-text media soon though.