The image above, embedded with  will be downloaded locally, and the image src will be replaced with the new url.
The image below, embedded with  won’t, because of the bug.
What happens is the image is correctly downloaded locally, but then the url replacement won’t work, because the code is looking for a src with http: prepended to it.
Aaaah, cheers! The first post now shows the bug, after moving to embedding from the Mozilla Wiki (it was the last place I thought you were going to have blacklisted… and I was right!)
Just to clarify, this is about the behaviour triggered by enabling the download remote images to local site setting.
The issue isn’t whether the image is displayed or not, but where it’s hosted. Both images were embedded from the Mozilla Wiki, but only the first has been downloaded locally to your cdn. (The second has been downloaded, but the regexp used to edit the post failed because it was looking for a url with http: at the start)
This has also exposed another bug, the url in the code block also got replaced. It initially read:
Beware, there lies 
