It appears that all you have to do is grab an image off your local computer and specify a few bits of information to WordPress and it’s done.
OK it’s a little more complicated than that but not by much.
Click the Add an Image icon next to Upload/Insert and then select an image off your system. Then you need to specify the Title, Caption, Etc. as well as the size the image will take-on once imbedded into your post.
In the case of the image above it was resized by me to be 750 pixels wide and I specified that the full image be posted. But it appears that the maximum width for this theme is 700 pixels so the image has been reduced.
In the future I will make all my images for this blog 700 pixels wide. Lesson learned.
This photo and many other by yours truely can be seen at the noccc.bgphotosig Picasa web site. The link is on the right-hand sidebar under Blogroll.