Tom, when you embed an image in a post using the "Insert Image" icon above the Post Reply text box, the image has to be hosted by some other website, and the website has to allow Direct Linking. Some host websites allow it, some don't, and some do only if direct linking is checked somewhere in your account preferences. Embedded (direct linked) images show up within the post here at the exact location you insert them; they are automatically limited to 800 pixels wide, and will be reduced to that size if you use something larger.
Another way to get your image to show up here is to attach it to your post. At the bottom of the Post Reply dialog, below the text box, you will see the word Attach. Click "Choose File", and you can select an image that is on your computer. It will show up as a large thumbnail at the bottom of your post (though not in the Preview), and when people click on it, it will expand to its full size. I suggest looking at other posts where people have done this, and get a feel for how it works and the image sizes etc. that people are using here.