Basically this problem is because blogspot will block images that don't have their own sites as a referrer. You can fix this for your own browser with some firefox plugin to send the correct referrer, however anyone looking at your gregarius installation will have a problem.
sameerd, may I ask which particular Firefox plugin that can help with showing the image on my browser? I understand only my browser may work correctly but I may want to put up a FAQ page regarding that so that other Firefox users can benefit from it.
Oh, by chance, I found the Firefox extension/plugin that paves the way for Blogspot images. The extension is called "Send Referrer". After a browser restart, all Blogspot images surfaced. So far, it is promising.
Just curious, can a Gregarius plugin be developeed to provide the same solution like the Firefox extension?
No, this can't be done, not in a simple manner, anyway: fetching the images is done at HTTP level, and is handled by the Web browser. Your gregarius installation is never "notified" that a remote image is being fetched.
What could be done, would be to rewrite all image html tags, so that your webserver fetches the images itself, stores them locally, and then sends them to your browser, but I don't really see the point.