Does the fetch happen immediately when Google receives the email? Or does it occur the first time the user opens the email?

If the latter, sender image tracking will be alive and well.

Yes they can. All I need to do is

    <img src="image.jpg?userid=123456"/>

and I can tell whether you opened it or not. Google could strip out query strings in their proxy, but I'm not sure that's a good idea.

Presumably Google would cache the image on receipt, not on open. If that is the case, then the sender has no way of knowing if you actually opened the email (unless you do so from a desktop IMAP/POP client).