I am experiencing similar problems with WP 2.02:
if chosing “send to editor” in Firefox, the image (original size) is inserted. this is the way I want it to be.
if doing the same from IE, the *thumbnail* of the image is inserted. why oh why?
I do not have the option “using original / using thumbnail” mentioned above at all.
any ideas how to have this work the same way for all browsers?