Forgetting about all the technicalities involved, I'd prefer to host images on my own server where the site is hosted.
Main reason is Control !! What if the other hosting site is down ?? It would look bad if your site is up and the images dont load. It would be better if the entire site is down.
That is what I feel.......Iam not good on technical aspects but believe that Control must always be in our own Hands !!

__________________
Madhav
Hyderabad
India