This seems to be an issue with the actual new feed generator than the News Feeds (RSS) module, at least from what I see at this point. When I view the source code for the feed I see the image information embedded in the item description element as:
src="/News/Portals/17/images/celebrate100.jpg"
So, when I place the feed on my site, I get the blank placeholder, and when clicking on that area to view the properties, I see it defined as:
http://localhost/News/Portals/17/images/celebrate100.jpg
This of course would not give any image, because it's not part of my site. Now, when I bring up the feed in a browser, the image does show up, and has the following source property defined.
http://ww2.fredonia.edu/News/Portals/17/images/celebrate100.jpg
My first thought is to change the embedded definition to the match the above, and it would probably work. I can follow that link to get the image, and that's what DNN would have to do.
So, the problem is really how to specify the image location from that module you are using, to embed it in the feed's description element. The News Feeds (RSS) module will only display the feed as given and really doesn't control the creation of the feed. If you can't get the above suggestion to work, try asking the developer of that module how it should be done.
Now, I might be missing something but I don't see this as the News Feeds (RSS) module's issue. If you have other examples, or more information, I'll keep watching the post.
Cheers,