Hi Ken,
You need the picture to be somewhere on the web already, such as Flickr or some other similar photo hosting site.
You then Click the image button and the cursor should be between two of these: [img ] [/img ]
You then cut and past the URL of your photo (go to the pic on the internet, right click and choose "properties", cut and paste the address from there) into the gap and the pic should appear on the post

Hope that helps!
Smudge