As others have mentioned, that was implemented in a hurry due to tightening up security and safety around embedded images. I've brought it up to the devs to hopefully rectify, as if an instance is trustworthy enough to federate with (aka, not actively malicious) then it is probably safe to show their embeds (behind a blur).
At the latest, this restriction will go away when lemmy upgrades to pictrs 0.5 which will support proxying image requests, but unless there are objections from the rest of the team we will likely add all federated instances to the image allowlist before then.