I think you need to have the image hosted elsewhere on the web: Flickr or similar, and then click on the insert image button on the bar (looks like a mountain in a square) and put the image url into the pop up source box.
Mike may be along in moment to tell me/you there is a better way. That one works though.
Upload the images to an image hosting site like Photobucket or a blog, or anywhere really.
Then hit the IMG button on the text tool bar or the image icon on the visual toolbar and paste in the URL of the image, and hey presto.