3 methods for uploading photos.

Q: Having trouble dragging photos once I upload them to the post. Are there other options?
A: Yes, use the new editor which uploads your image at the spot where you placed your cursor (inside the post editor). No dragging required.

Updated post editor

Please go to settings>basic>select post editor.
Choose [updated editor]. 

Save settings

An overview of the updated editor:
http://www.google.com/support/blogger/bin/answer.py?hl=en&answer=156829 

3 methods to place photos:

http://davidchin8888.blogspot.com/2011/05/wrap-text-around-photos.html


source: http://www.google.com/support/forum/p/blogger/thread?tid=4a252ee34ae0139a&hl=en