To use this plugin, download it from the link at the end of this post. After you install this plugin on your WordPress Blog, you will see “Grab & Save” option in the “Add an Image” box.
Clicking on it will take you to a page where you can enter the URL of the image which you wish to upload to your Blog. Just click on “Grab” and the iage will be uploaded to your Gallery. Now you can use it as a featured image and no worries of getting a 404 error.
This method is quite easy and convenient, but the filename of the image remains the same as it is in the original source. This won’t help in SEO, but you can still change the name of the Image and the alt tag.