When using IE8, if I add an image to the content in the editor via the Image Manager, the SRC attribute gets an absolute URL. I can reproduce this on your demo at http://demos.telerik.com/aspnet-ajax/editor/examples/filemanagers/defaultcs.aspx.
When using IE9 or higher, the SRC gets a virtual path, which is what we want.
Is there a way to make IE8 get a virtual path?