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I've also tried to post pictures and it will not let me either. I have went through all the steps and it doesn't work.
Try using Photobucket.com, it is a really easy way to upload pictures.
1. Create a username/password
2. Hit the BROWSE button and find the picture on your computer
3. UPLOAD the picture
4. COPY and PASTE the picture in your post
I use Image Shack as well. When I upload the picture on Image Shack. It will display my picture. I will then right click on my pic in Image Shack and then click properties. In the properties window it will display the http link of the jpeg. I copy that jpeg location and insert it in the "insert image" button on our message tool bar. When you post the reply the pic will be displayed in the thread. This method is called leeching.