I spend a lot of time walking novice users through how to use WordPress. Occasionally I get ideas on how to make WordPress easier to use and this is the simplest one to implement.
The problem: Some users try to click on "upload" and "insert" and don't realize that they need to click on the icons to the right.
The easy solution: Adding a colon will indicate that the icons are where the action is at and not the words themselves.
I have noticed that new users often are banner blind to the upload/insert buttons. Adding a bit of color to these icons may boost usability again.
Another improvement would be to add an image icon to the icon menu in TinyMCE. I know the complexity is higher here since TinyMCE is its own project.