Sorry, I'm not sure I understand what you are trying to say?
xIFr doesn't do any "web search", and I don't see any advantage of copying images to a temporary location (and it would probably require extra permissions if possible to do at all).

If it is the "Access your data for all web sites" permission you are worried about, it is only used to read data from images found on current webpage. And the permission would still be required to copy image to somewhere else (read from original location, write to new location).