In the last update to CS-Blogger, I enabled a bunch more editor options that include a lot more formatting capabilities.  And probably the most anticipated feature, file uploads are now available. 

Here is my first uploaded image:

Yeah, it's a bit of propaganda for CS-Project... but what do you expect?  Anyway, I'm still working on some integration issues with CS-Blogger and FCKEditor (that's the software that provides that pretty editor interface... I know, I know, you thought I made all that).

UPDATE: There are still a few bugs in the file upload system, so the first screen that appears when ya click the "image" button lies about uploading successfully.  For now, click the "browse server" button, then use the form at the bottom to upload the image (it'll show up in the window above the form immediately.