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Thanks Brian. I'll mail support but here's what I've found out for reference.

The problem does appear to be a browser/OSX clipboard issue.

If you Copy Image on an image in Firefox 8.0.1 or Chrome 16.0.912.63 then the pasted image is always a tiff regardless of source format. This issue occurred with earlier versions of Firefox as well.

So to refine my original question - Is there a way to be able to copy/paste correct image format into Outliner from Firefox?

As far as I can see the only workaround is use Copy Image from Safari or save image locally first.

There doesn't appear to be any way to change the default image clipboard format from TIFF the way you can change the default screencapture format (defaults write com.apple.screencapture type jpg
)

No clean answer on the Apple forums either
https://discussions.apple.com/thread...rt=30&tstart=0