Hi Carol, I had the same problem too and somehow I stumbled on a solution. I upload the photos I want to put on my blog to Picasa Web Albums. To access Picasa from your blog, once you've signed in go to Account Settings and then to Dashboard, scroll down to Picasa Web Albums and click on photo or album and upload your photos there. When you're writing your post and want to add a photo you can then upload the photo from Picasa Web Album. I hope this makes sense!
I had a problem last month, turned out that I had exceeded my Google picture limit. I've since learned that I need to up load pictures to Picasa, and then into my blog post - rather than loading them to my computer and then to the blog post. I'm now doing what Anna described above.
I've had the same issue and now load my pics onto Picasa. Then when I go to insert the picture on a post, I choose the pictures from Picasa as Anna and Faye do.I exceeded my limit on Google too:))
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