Is it possible to have certain custom styles (in your editor.css) be available only for certain HTML content? Please see examples below.

Button for text, not for images
For example, I have a css style called "button" which will turn normal text into inline-block, add padding, add background and a text colour, making it look like a button. Obviously I don't want this css style to appear when highlighting an image in the WYSIWYG editor.

Frame for images, not for text
In addition, I have a custom css style that gives images a "framed" look by adding padding, background color, a coloured border and shadow. I don't want this style to be avialable when highlighting text.

TinyMCE isn't that smart I'm afraid.
You can add styles to the dropdown - however you can apply them to any element. Just that elements excepting the defining one will ignore the style, as per how CSS works normally.

eg. Defining span.button {...}
You'll be able to choose to give an img the .button class in TinyMCE - but it obviously won't do anything in terms of modifying the style.

Alright well at least I can be rest assured it's a lack of functionality then and stop browsing the web for a simple fix! Thanks :-)