Save BitmapImage to File

Expanding on Chris Baxter's solution, this Converter uses the local version if it exists, otherwise downloads it and saves the file.

using System;
using System.Globalization;
using System.IO;
using System.Windows.Data;
using System.Windows.Media.Imaging;

namespace MyNamespace
{
    public sealed class UriToCachedImageConverter : IValueConverter
    {
        public object Convert(object value, Type targetType, object parameter, CultureInfo culture)
        {
            var url = value as string;
            if (url == null)
                return null;

            var webUri = new Uri(url, UriKind.Absolute);
            var filename = Path.GetFileName(webUri.AbsolutePath);

            var localFilePath = Path.Combine("C:\\MyImagesFolder\\", filename);

            if (File.Exists(localFilePath))
            {
                return BitmapFrame.Create(new Uri(localFilePath, UriKind.Absolute));
            }

            var image = new BitmapImage();
            image.BeginInit();
            image.CacheOption = BitmapCacheOption.OnLoad;
            image.UriSource = webUri;
            image.EndInit();

            SaveImage(image, localFilePath);

            return image;
        }

        public object ConvertBack(object value, Type targetType, object parameter, CultureInfo culture)
        {
            throw new NotImplementedException();
        }

        public void SaveImage(BitmapImage image, string localFilePath)
        {
            image.DownloadCompleted += (sender, args) =>
            {
                var encoder = new PngBitmapEncoder();
                encoder.Frames.Add(BitmapFrame.Create((BitmapImage) sender));
                using (var filestream = new FileStream(localFilePath, FileMode.Create))
                {
                    encoder.Save(filestream);
                }
            };
        }
    }
}

And make sure you can access the converter within your xaml

<UserControl xmlns="http://schemas.microsoft.com/winfx/2006/xaml/presentation"
             xmlns:x="http://schemas.microsoft.com/winfx/2006/xaml"
             xmlns:mc="http://schemas.openxmlformats.org/markup-compatibility/2006" 
             xmlns:d="http://schemas.microsoft.com/expression/blend/2008" 
             xmlns:u="clr-namespace:MyNamespace"          
             d:DesignHeight="500" 
             d:DesignWidth="420">
    <UserControl.Resources>
        <ResourceDictionary>
            <u:UriToCachedImageConverter x:Key="UrlToCachedImageConverter" />
        </ResourceDictionary>
    </UserControl.Resources>            
</UserControl>

And use the converter on an image

<Image Source="{Binding URL, Mode=OneWay, Converter={StaticResource UrlToCachedImageConverter}, IsAsync=true}"/>

When you create your BitmapImage from a Uri, time is required to download the image.

If you check the following property, the value will likely be TRUE

objImage.IsDownloading

As such, you much attach a listener to the DownloadCompleted event handler and move all processing to that EventHandler.

objImage.DownloadCompleted += objImage_DownloadCompleted;

Where that handler will look something like:

private void objImage_DownloadCompleted(object sender, EventArgs e)
{
  JpegBitmapEncoder encoder = new JpegBitmapEncoder();
  Guid photoID = System.Guid.NewGuid();
  String photolocation = photoID.ToString() + ".jpg";  //file name 

  encoder.Frames.Add(BitmapFrame.Create((BitmapImage)sender));

  using (var filestream = new FileStream(photolocation, FileMode.Create))
    encoder.Save(filestream);
} 

You will likely also want to add another EventHandler for DownloadFailed in order to gracefully handle any error cases.

Edit

Added full sample class based on Ben's comment:

public partial class MainWindow : Window
{
  public MainWindow()
  {
    InitializeComponent();

    SavePhoto("http://www.google.ca/intl/en_com/images/srpr/logo1w.png");
  }

  public void SavePhoto(string istrImagePath)
  {
    BitmapImage objImage = new BitmapImage(new Uri(istrImagePath, UriKind.RelativeOrAbsolute));

    objImage.DownloadCompleted += objImage_DownloadCompleted;
  }

  private void objImage_DownloadCompleted(object sender, EventArgs e)
  {
    JpegBitmapEncoder encoder = new JpegBitmapEncoder();
    Guid photoID = System.Guid.NewGuid();
    String photolocation = photoID.ToString() + ".jpg";  //file name 

    encoder.Frames.Add(BitmapFrame.Create((BitmapImage)sender));

    using (var filestream = new FileStream(photolocation, FileMode.Create))
      encoder.Save(filestream);
  } 
}