I believe that your issue is that the images in the feed you are trying to show are embedded in the HTML of the article content and not specifically defined in the feed as the articles image tag.
Here are two examples that illustrate Syndicate Press handling of the custom image formatting:
For both of these examples, I have set the SP 'Custom Formatting' Image div to <div style="padding: 10px 10px 10px 10px;background-color:#b0c4de;">
In this example feed, you can see the light-blue background color and the padding on the div surrounding the image. The feed that SP is displaying on this page contains a specifically defined image for each article in the feed.
In this second example feed, you can see that there is no light-blue background or 10px padding around the image. This is because the images are embedded in the HTML content of the article.
Syndicate Press Custom Formatting does not apply styling to the content within the article HTML, unless you specifically override a css class that is used within the article HTML.
If you post the feed URL we can check for sure, but given the results of this experiment this appears to be the explanation for the behavior you observed.