OK, appears that the way I've always done it still works, for what it's worth, Duke.
All I do is open a second browser-window and call up whatever web-page has the image I want to post; and then simply drag the image from the other page into the body of the post I've created. Like, right now, I've got that Duke Silver image open in another window, and I'm dragging it into this post:
Works fine.
The catch, for me, is that it has to be Firefox-to-Firefox. I view IT in Firefox but use Safari for most other stuff; however, if I try to drag an image from a Safari window into an IT post on Firefox, what shows up is just the URL-code. (Similar to what you're talking about I think.)
Whether that has any bearing on what's going on with your posts, I dunno. But if you haven't done the drag-and-post thing, might at least give that a shot....