Click the "go advanced" Tab on the lower right of the page. Then select "Manage Attachments" Tab. Then under the "Upload files from Computer" heading select "Browse" this will open up your computer, select the drive where your picture is stored, select it and upload. That should do it.
Another way to add pics to a thread is by creating a account at a place like www.photobucket.com Then you can just copy/paste the IMG code option once uploaded then folks don't have to click on the tiny thumbnail image to enlarge it.
Of course some things are best left as a thumbnail though....example below