Not sure if you've figured out the issue with the images but I just did! Yay! I found that others were saying to add add_theme_support( 'post-thumbnails' ); to the php but I can't sure how/where. But I just fixed it and I can now add images into the title.
Apperance > Editor > Theme functions (functions.php) > add add_theme_support( 'post-thumbnails' ); to the code as I have below > Update code > Refresh.
It'll add the featured image ability into your next post!
Apologies if you've already done it, but I was so happy to find out how to do it I thought I should share. Just have to figure out how to resize it now :/
require_once locate_template('/lib/init.php'); // initialize
require_once locate_template('/lib/themes-functionality.php'); // additional themes functionality
require_once locate_template('/lib/init-menu.php'); // initialize menu
require_once locate_template('/lib/newadmin.php'); // new admin
require_once locate_template('/lib/scriptstyle.php'); // loading style & script
add_theme_support( 'post-thumbnails' );