You are correct, for pics on the computer I just use the picture Icon. It reduces in size, but can clicked on and enlarged.
I've used the paperclip icon, is there any practical difference in the two ways to upload a picture to mikeholt.com?
Once the picture is uploaded, you can do "Preview Post", hover over the thumbnail, right click, and choose "copy image URL" to get the URL for the uploaded image. Then you can inline that URL between tags to get the full size image inline in the post. You probably should leave the [ATTACH] tags for the thumbnails to be sure that the image is counted as being referenced in the post you are making.
I assume that the problem some people have with this is that if the uploaded image is too large (in bytes), then the forum software does some not very clever downsizing, producing an unreadable result. One workaround is to shrink the image (in bytes) before uploading it, not what sure what the threshold is for the forum software.
Cheers, Wayne