How about if I try it right now and see what happens? I've picked out a .jpg to try it with.

I click the "Manage Attachments" button. The instructions say that for .jpg attachments the max filesize is 97.7 KB (mine is 88KB) and the max height and width are " - - ".

I click "Browse", select the image on my computer, and click "Upload". After several seconds I see my filename shown as an attachment to this post. Now I'm going to click "Preview Post"...

Sure enough, I get an "Attached Thumbnails" box at the bottom of this post with a miniature copy of the picture about an inch and a half each way. When I click on the thumbnail (right-click, so I can open it in a new tab without losing what I'm writing) I see a respectable-sized copy of my picture, maybe 6 by 8 inches.

What happens differently for you?