The only way you can post an image here is to use an external site. Click on the image icon in the reply box and insert the url for your image. Members cannot post attachments.
From your post above:
If you have uploaded an image as an attachment, you can click the arrow next to the 'Attachment Icon' and select it from the list.
You cannot upload an image as an attachment since we don't have attachments enabled.
To include an image that is not uploaded as an attachment and is located on another website, you can do so by copying the full URL to the image, (not the page on which the image is located), and either pressing the 'Insert Image' icon or by typing after it, ensuring that you do not have any spaces before or after the URL of the image.
That is exactly what you need to do.
The FAQ contains stuff to cover all situations. We don't have all things enabled for a lot of different situations. Image posting is just one.
I hope this helps.