Can't wait for this to get worked out...
once in a while you get shown the light, in the strangest of places if you look at it right
I don't know what the picture problem is but try using the advanced reply format and manage attachments in the meantime. You should be able to upload full size images that will show as clickable thumbnails.
I'm working on figuring out the attachments issue though.
Just upload them to photobucket and use the URL link. It seems to be the easiest way.