Cache and optimize images?

The cache and optimize image feature will cache and optimize images in posts, whether they're embedded from your Dropbox or from elsewhere on the internet. Note that this won't affect the files inside your Dropbox, just the images delivered to your readers

If an edit is made to an embedded image, how long does that cache typically last?

I just played with different views and templates to make galleries for my photography portfolio. I understand the importance of "CDN" in general, but also see some conflict in using the separate "blotcdn.com" domain for hosting images. I'd rather have an option (in blog/portfolio settings) to choose if my pictures are hosted on my custom domain as is. Is this an economical decision, or purely technical decision?

You can choose to disable this feature and serve the images directly from your site's domain – this feature is there for performance, it actually costs me more money to run a CDN and without it, images can load quite slowly when your visitor is on the other side of the world, due to the Bandwidth-delay product. Keeping the server-client RTT short is important!