capt_noonie - I know what you are trying to do and it took me a long time to figure it out, too.
You are uploading and then closing that pop up window. Then you are posting the reply..right? Well, before you post the reply, put your cursor where you want the pic to be and THEN click on that arrow BESIDE the paperclip icon..you will see a drop down box now and it will list attachments (one to four depending on how many you uploaded). Click on the one you want and you will see the code where your cursor was. Then click to post your reply