I figure this is a permissions issue, but I can't figure out what combination of settings it takes to make it go away. I, as admin, can embed a photo in a comment or reply; but my subscribers can't. Not in Firefox, not in Safari, not in Chrome. IE hasn't been mentioned, which warms my heart. Still, It's driving them nuts.
One possible problem is that "File Browser" is currently disabled, and can't be enabled. Every time I try, when I click back to that screen it's disabled again. As I understand it, though, this enables you to choose a file from your desktop, whereas clicking the "Image" icon in the Comment box simply pops up a properties form that allows you to type in a URL. Seems like a separate function to me.