kenparry. I've stopped using the insert image button as it has been very hit and miss with my images.
Instead I press the "Source" button and then paste the image link in between the image tags as below - I type the image tags in manually.
[img]paste link here
[/ img]
There's no space between the / and the i, but I've had to enter them in this post otherwise it assumes it's the end of an image and removes the text 