At the top of this page, click "User CP".
At the bottom on the left click "Your Photos & Albums"
On that page click "Upload"
Click one of the "Browse" buttons and navigate to the image you want to upload.
After it's uploaded and you see it in the "Your Photos & Albums" area, click on the thumbnail of your image to bring it up. Now right-click on it and select "Copy Image Location". This you will paste in the box asking you for a picture address.
Clear as mud?
You can also use the "Manage Attachments" on the bottom of the reply page. I think this puts thumbnails of your images in your reply.