Would it be possible to add a FLAG so that the image can be dumped elsewhere instead of /var/lib/lxd/images
lxc publish xenial-nougat --alias today-peregrine-HUGE-FILE
Nope, all images are expected to be in /var/lib/lxd/images and to be accessible from that path at any time (it’s not temporary storage).
You can move that path to a larger storage volume though.