To upload pictures you need to click "upload file"
then in the little box that comes up you use the browse button to find your picture. (pre edited to around 300 pixels square and file names need to be short as possible with no spaces in them)
the upload path needs to read /public_html/blog/blogimages/
and leave the file name the same (unless you need to edit it)
Click "Upload" and then when the next box comes up use the inline option.
Thats it!