You are near,
-once you uploaded your photo as an attachment (you allready done this), click on the "preview post" button. A preview of your to-be-published message will appear (no need to make "test posts").
The thumbnail will appear on the preview of your message.
-right click on the thumbnail and select "copy shortcut" or "copy image location" (if using firefox)
-click on the "insert image " button (it is the only colored button above your reply box
-delete the "http://" text, right click on the text line and select "paste"
the url address of your uploaded photo-attachment will appear on the insert image window.
-click "ok" and you are ready
you can "preview post" again to check if is it ok or you want to make any changes