Photo positon on updated editor

Q: How do I upload a photo at the position of my cursor?

A: Go to settings>>basic>>select post editor.
Choose "updated editor". Save settings.
You can now choose your preferred sizes: s, m, L, XL, Original

Here is a link about the features of the new editor:
http://www.google.com/support/blogger/bin/answer.py?answer=156829