I've done it before with the Gustav pics, but I remember it being a bit strange. The key is that the image needs to already be online and you add the url of the image to the thread.
1. press the Host an image - you may have to create a new account
2. once created, you add the image
3. you should then have a 'url' option that shows you the url to add to the page
4. when you're back in the thread, you add the reference to your image directly in the post - hovering over the Image link in the posting shows you the format...
try that and update the instructions as necessary...good luck...