To upload attachments you need to be in the "Advanced" editor (the one with lots of buttons). You'll get this by default when you start a thread, but when replying to one you'll need to click on "Go Advanced" (don't worry, you will not lose what you were typing)
Then "manage attachments", which is an icon, and a button below.
"Insert Inline, Done"
Images look small? Don't worry, it will come out fine:
Delete uneeded attachments in the Attachment Manager, by hovering over them, then clicking "X"