Ok I worked it out finally.
Once you are viewing your image in the Gallery (in the size you want), you must then click on the image again and it comes up with a different url... That's the url you have to insert as your image. And don't use the 'Host an image' button, use the 'Image' button beside it instead. Well that only took me 6 hours, you better like my pic now...
OK ignore those directions they only work if your pic is a very large one and has been resized. A better explaination is once you have a pic in the gallery, click on the button below it that says 'copy' then paste this url into your actual post and you'll get something like this:
Now just copy the bottom
address without the [/img][url] part at the end.
so once you copy that part, (using Edit, Copy) you have to paste it into the button with the little green square (says 'Image' when you place your mouse on it), which is 7th from the end.
It definitely does suck eggs but it's easy once you know how.