Image encryption is a commonly used method to secure medical data on a public network, playing a crucial role in the healthcare industry. Because of their complex dynamics, memristors are often used in developing novel chaotic systems that can improve the efficiency of encryption algorithms based on chaos. In this work, we propose a novel locally active memristor-based chaotic circuit model and present a real time hybrid image encryption application developed on a PYNQ-Z1 (Python Productivity for Zynq) low-cost FPGA board using Jupiter programming environment. The proposed hybrid algorithm combines memristor-based chaos with a DNA (deoxyribonucleic acid) encryption algorithm exploiting diffusion-confusion technique. We initially present a new compact and inductorless chaotic circuit, derive the model equations, and then verify its chaotic dynamics numerically through the investigation of the phase portraits, Lyapunov exponents and the bifurcation diagrams. We further implement the chaotic circuit experimentally with discrete elements. The randomness of the chaotic sequence is improved using Trivium and von Neumann post-processor algorithms and assessed through the NIST tests. Finally, the performance of the encryption algorithm is evaluated through various metrics, including histogram and correlation analyses, differential attack, information entropy, as well as data-loss and noise attack, demonstrating its security and suitability for real-time encryption systems.