Yeah, I've never been able to upload a picture to anything but an attachment.
That said, the photobucket method is very easy. I never even bother with the BN upload method. I just copy and paste a URL from my photobucket collection, with image tags already there, or just snag the bare URL and add the image tags myself. Photobucket just makes the tagging REALLY convenient.
There is even a free photobucket app for iPad and (I think) iPhone. But there are lots of places on the web to put your stuff now. Any place that hosts your pictures will work.
The bottom line is that all you have to do in a post is surround a URL for a picture with \\[IMG\\] in front and \\[/IMG\\] in back (backslashes added to prevent interpretation of square-bracketed objects as image tags. Tags are case-insensitive.).
Grant prefers that we not link directly to other people's pictures, for legal and web ethical reasons. So you just make your own copy according to your personal and regional interpretation of copyright law, put a picture ANYWHERE on the web, get the URL, and then do this (minus the \\ characters):
and you get this:
<---- software turns wrapped URL into image
It is an extra step, but it probably saves BN some server space anyway.