The best way to do it is go ahead and attach the image file to the message as an attachment. This keeps the image with the message. The alternative puts it in your image library. Over time your library would fill up with images that you can't keep track of. If you ever clear out the library, you'll inadvertently break the link to the image that is embedded in the message. Later readers of your message will not be able to see the image.
Once you've posted the message with the attachment, right click on the hyperlink and copy the URL (at least in Firefox, actual commands in Internet Explorer or other browsers might be different.) Go to the message options and edit the message. Now go to where you want to insert the image, and use the Insert Image button. Go to the 3rd tab on the dialog, something about other 3rd party site, and paste the URL to the image that you had copied earlier. Finish out the dialog box, and post the image again.
Now your edited message contains the image, and the attachment which is that image stays with the actual message. Your library stays clean, and there is no risk you'll break the image later if you decide to clear out your image library.
It sounds complicated when written out. But once you try it, it really isn't that many extra mouse clicks.
