so here are the steps I went through to post a picture....if there's a short cut please let me know
1.log on
2.create content
3.personal blog, or image
4. title etc.
5. when you get to the "body" block you have to type in enough to allow the thing to post and you must position your cursor where you want the photo to show up
6. At the bottom of the blog entry page go down to "file attachment" and "browse"
7. find your photo on your computer or drive - photo needs to be sized first as follows or it will not insert.
    a) pixel width not more than 600 pixels (500 for a comment).  
    b) KB total no > 200 - JPEGS ok  GIFs are fine and smaller files than JPEGs  - this means photos need to be run through a simple image for web cruncher - even the most simple version of Photoshop or other photo manipulating software has the ability to size photos for Realneo.
8.hit attach - image is uploaded to Realneo server,
9. now, below the attach button,  you have an active URL link to click on to get the url of your photo which now resides on the realneo server.
10. copy this URL link and paste it into the box that comes up when you click on "insert image"(this is one of the icon choices above the body of the blog entry box   - it looks like a yellow post card with a stamp)  If you don't see icons above the blog text box, just below the box is "disable rich text" or "enable rich text"  click them back and forth an the icons will become visible one way or the other.  
11.the  photo  should appear wherever you placed your cursor in the "body" box - if it doesn't click on the pixel width size line in the insert box - then the image will show up in your post. 
12.now it's time to preview and you have to refresh realneo to see what you have wrought...if you don't like it, not to worry, you can hit edit and scroll down to the bottom of the page and delete the image ..
13. you can insert numerous images into one blog post.  If you insert the image in front of the text in your blog, the image and about 4 or 5 lines of text will appear on the front page of your blog and and on the home page if admin advances it. 
Hopefully I didn't omit any steps..
cheers
martha
p.s. hopefully the experts will correct this and then position it under "directions" for contributors

You can insert images into your comments under someone else's post  by following the above directions, posting to you own blog - under "images".  You must size the image narrower - say 500 pixes - for the comments box because they are narrower than blog boxes.
 Upload the image to your blog which puts the image on the server.
Then copy the assigned url and past that URL in via the "insert image" icon into the comment box.
Submit comment and the image will appear in the comment.
THis is easier with the newer Drupal modules.

Good luck.

Updated (to reflect new drupal image module) March 13, 2009 by J. Buster