Make sure your image file type is .jpg, .gif, or .png. Other file types have spotty support depending on browser and platform.
I go here to resize images for the web (if needed): http://www.resizr.com/
Download resized image and then I upload it here: http://tinypic.com/
Get URL from tinypic and use it in the advanced reply window with the image button.
Lots of other ways/places/methods out there for image posting, this works for me.