In the "Advanced" reply screen, which is also accessible by clicking the "Quote" reply option, there is a block of "Additional Options" below the text box.
There you will find "Manage Attachments". Click on that, browse for your image, and upload it. Note that only the specific file formats listed there can be uploaded, and each of them has a size limitation.
Posting images used to be a complicated process, but now it is easy.