Q. When conducting a image search within Google iSites, are these images available for reuse? If so, what is the proper citation method?

Yes, that's right those images are labeled for reuse and modification but there may be restrictions. It's good to go to the original photo and look at the rights. You probably still need to give attribution to the creator, they may ask you to share it under the same Creative Commons license, etc. 

I Don't fully trust the search engines there's too much potential for error. The students using the photos are still responsible for using them correctly so it's up to them to make sure that they are using the photo under the terms set out by the original creator.

If you do have students in Google images, they can adjust their results based on licensing (Google image search > Tools > Usage Rights

You could also have students search for photos on:

• Creative Commons Search
• Wikimedia Foundation