How Do I Auto Generate Thumbnail from First Embedded Image in a Post? All the Thumbnail Plugins only generates thumbnails from self hosted images.
Almost by definition thumbnails has to be on your server. It is possible to write code that imports the image and produces the thumbnail from it (and I am sure there are answers here with code which does similar things), but this will automatically make you a copyright infringer which is illegal in about 95% of the countries in the world.
I can only guess why plugin and theme developers do not supply such functionality, partially because everybody else does the same, partially because they don't want to expose their users to lleagal problems and partially because they are afraid that as the developers of the tool they might be liable in the copyright infringement as well.
Bottom line: If you don't want to help make some lawyer richer you should never post content for which you do not have an explicit permission from its creator.