Yes, this can work with external URLs. The plugin will first download the image locally and then create the thumbnails from it. And you don’t have to do anything extra for this. Just install the plguin and start writing a new post with external image.
Do this script generates all sizes of images or just the thumbnail?
I have external images for disk space issues and I dont want to have them uploaded in my server, since that’s the first thing I tried to avoid.