I use php, with the NetPBM tools to do image format conversions on the fly when the browser requests them.
The first thing I do is set the image type with:
header("Content-type: image/png");
Next I run a passthru() function that converts the image (from tiff to png in this case), and pipes the information back to the browser.
You say the images are remote, but you do not say how your server accesses them. To use the passthru method, you need a command (be it application, script, etc.) that will pipe the binary image data back out a pipe (like cat.) cat may not work for image files, you may need some binary cat utility.
The php script can be named whatever.php. The header Content-type tells the browser a png (gif or whatever) is about to be sent instead of text. Then just include with -opentag-IMG SRC="myfile.php?arguments"-closetag-. (Sorry, not sure if Open/Close brackets will make it into the post.)
Hope this helps.
-Pete