Might I suggest to examine how members successfully attach pics or embed them so use the Quote post and examine the syntax. Then just "go back" in your browser.
I try to compress any pic that does not require great detail to reduce the space used on Daves server and find that less than 100 Kb is generally sufficient quality.
Yep, use "Attachments and other options", select your file location (local or remote) and "(more attachments)" if more are required.
Post the reply, then copy the pic thumbnail URL of your uploaded pic, then Modify your post and Paste the URL in the part of the post you want it, THEN highlight it with your mouse and then click on the Insert Image button.
This will embed the URL within the [ img] URL [ /img] as RobertHolcombe describes.