OK, so this is interesting. Here I am with a new editor called "Drop Editor". It comes with some other tools called "Drop Pics" and "Drop Files".
Drop Pics, as it's name implies, allows you to drag & drop pictures from your computer to an article... pictures like this one here:
Now, I've saved this guy as a thumbnail.
But I could also have dragged the full size image. In fact I did that in a second step so I could grab the URL for it then I hooked that URL to the link for the thumbnail.
Also of interest is the "drop files" aspect.