It seems in IE you cannot do it the way I described. I always use Firefox, for example:
IE is so irritating. Or are you using Chrome?
Now I am logged in using IE:
So in IE, upload the image, and then click on it so it appears alone on the page and then cut and paste the link shown in the address box of the browser, using the same [img][/img] format. That's how I just posted the second example of the same image, in IE.