WordPress has a file upload capability built it. I use this all the time.
I don't use thumbnails because my PHP install doesn't have the required graphics module, but this shouldn't be difficult to set up.
Note that after the file upload, WordPress gives you some HTML code you can use to put the image into your post. This text is easy to change. I have changed it in my set-up so I can use a special photo formatting CSS class.
To do this, open /wp-admin/upload.php and change lines 206 and 208. In your case, you would want something like this:
<img src="path/tn_imag.jpg" class="image_formatting" alt="This is an image" />
image_formatting is a CSS class to format the image in your post.
Now, for lines 206 and 208 you would need to reformat the tag symbols and quote markes with HTML entities, and you would have to do something different for the path. I can't tell you exactly, since I don't know where or how thumbs are stored. But if you know a little PHP, this should be enough to get you started.
Honestly, no plug-in needed, as it is pretty simple.