Do you just want to put a pic in a post or have it for your avatar on every post?
Avatar: got to your user Control Panel> click the Profile tab> select Edit Avatar. Click the "Choose File" button and select you picture on your computer () for an avatar it must be small, 90 pixels x 90 pixels max) Once you have located the file click the Choose button, then click Submit.
Pix in a post: When you are composing a post look below the box where you are typing, click the Upload Attachment tab, select you file as w/ choosing an avatar. After you click Choose, you will be back at the FDMB window, click Add the file, then place your cursor where you want the pic to be and click Place inline.
Image size is limited here too, 500 x 600 I think. If the picture is too large you may get an error warning or just a blank page. Use your photo editing software to resize and try again.
Another option is to up load photos to a website like Picassa or Facebook and use the img button to link.