With the img_assist module, it's easy. Under the main text area of teh blog post, there's an image for uploading and inserting images. Just click the image and the popup will guide you through the steps. An example image is inserted below.

In fact, we can even put images after the text.

Apparently we can only insert gif images right now.

*update*: We can put jpgs and pngs in the code as evidenced by this image: