By default, RadEditor generates images with relative paths and if the images folder is mapped
as a virtual folder pointing to the root of both sites in IIS then the images will be rendered without problems in the editor and in the public site.
Another approach is to enable the MakeUrlsAbsolute filter of RadEditor:
which will make all src attributes in the editor content have absolute URLs.
After that using String.Replace on the server, you will be able to replace or strip the desired part of the URL and therefore display the image correctly on the public site.
If you want to have more precise URL stripping you could implement your own custom content filter
that will convert the absolute paths to relative when switching to HTML mode or submitting the content by firing the
filter of RadEditor.
the Telerik team