Org mode is generating this tag:
<object type="image/svg+xml" data="" >
Sorry, your browser does not support SVG.</object>
Which looks okay to me. It's browser support that's the issue.
> The problems with the second bit of exported code is that it doesn't
scale the image to fit the block with 50% width (only a small part of
the image is visible)
Is it possible you're using an old browser? I'm on Iceweasel (Firefox) 38.1.0. (The bug was there a year or two ago, so by my standards it's a recent fix that we shouldn't rely on yet.)
> and you when you right click on the image, you
can't view it, save it or anything.
Again, I can, using the "This Frame" popup menu.
But clearly that menu name is misleading and confusing in this case! And I think that is reason enough to stick with the img tag for now: Firefox users can't save the image unless they telepathically know that "frame" means "image". "This Object" might be okay, I guess.
My suggestion is to use img for images; that also appears to be the consensus on Stack Overflow. Let's find a good syntax for including interactive objects in Org mode, though.