This is outstanding. I've always thought that the need for a third-party system (like "Hello!" or "Flickr") for adding pictures to blog entries was the only thing still keeping Blogger from true excellence. I got rid of blogger back before it was purchases by Google. Since then, it's been one improvement after another. Had free and integrated image hosting been in place back then, Peoria Pundit would still be a Blog*Spot blog.
My only question is how this company can continue to offer this fine service for free.
I also want to know how many of my fellow Bloggers are aware of this feature.
By the way, enjoy the pic of Jessica Simpson.