Just added a new feature – you can now select – ‘Add Media’. Here you click on the ‘Add Media’ button – see above. Then drag and drop your image onto the window or ‘select media’ and browse to the file. Image will then appear in ‘media library’. Click on image to make sure it is selected. Add a caption and or title. Select size, position and link if required. At bottom of screen you can then click ‘insert into post’. Done.
Also on post screen you will see top right of post area, 2 tabs – labelled ‘visual’ and ‘text’. Visual tab makes it easier to do your formatting and adding images or other files.
This link gives a better description of the actual process of adding images to your posts: