Read an article about Timthumb script being compromised making WP installations vulnerable. Source here
Taking a look at timthumb.php, There is the following function, which I presume is the culprit.
function checkExternal ($src) {
$allowedSites = array(
'flickr.com',
'picasa.com',
'blogger.com',
'wordpress.com',
'img.youtube.com',
);
Since my site is highly customized (therefore is complicated to update timthumb), would it suffice to delete those external domains as all the images are hosted on my server and hence doesn't require any of the 3rd party domains?