You're not doing anything wrong. When Live Writer uploads the images, it automatically creates a down-sized thumbnail image (your first screenshot) and stores it on the site.
What you're experiencing in the second screenshot is actually a feature of Live Writer, not a bug. WordPress has certain default image sizes for thumbnails, medium-size, and large-size (Go to Settings >> Media to see what they're set to). Live Writer has its own default settings. In addition, you can re-size images in Live Writer, and it will upload both the re-sized and original size to the server.
At times, you'll end up with several versions of the same image, both the Live Writer and WordPress default sizes and whatever size you told Live Writer to make the image.
So no, you're not doing anything wrong and no, it's not a bug.