Creating a Post
There is an 8 MB size limit on photos on this site. Be aware that the bigger the photo, the longer it will take to upload now and to display later for viewers. The fine resolution you get on modern digital cameras and scanner is great for large prints but total overkill for things like a blog. With larger sizes, you will soon run out of allotted storage space.
I take all my photos that I put into blogs with VGA resolution on my digital camera. If you have this option, it really saves having to resizing (or scaling) photos in a photo editor! If you have to resize, pick the 72 pixels/inch resolution, click the "preserve aspect ratio" (so things/people don't get fatter or thinner than the original photo), and set your width to something under 600.
Don't forget to do a "Save As" a new image so your original photo is not overwritten! A handy, quick editor for resizing on a Windows machine is Irfanview . GIMP is an open source image editor with many of the capabilities of Photo Shop (but not the cost!) and has versions for Windows, Mac, and Linux; it is, however, more complicated to use than Irfanview.
The tool bar in the posting editor has a picture icon. Hitting that brings up a smaller window for uploading your photos. You can upload to Blogger from your computer or from the web (but you need to know the URL of your photo as it resides on a photo site or another blogging site). If your photo is over 8 MB, it won't upload (see photo size note above).
Blogger will do some display resizing for you: small (as in a thumbnail), medium, or large.
You can post the image with no positioning: text will be below it or above it. Or you can position it on the left or right of the page and text can flow around it. If post the center of the page, text will go below it.
"Fixing" Images that Blogger Misplaces
The editor in Blogger (being used here) has a "what-you-see-is-what-you-get" aspect (the Compose tab) and an HTML (the actual language used by browser to display pages) aspect (the Edit HTML tab).
I find that in my Firefox browser, when I add any photos beyond the first one, they get put in at the top of the page. After you calm down from your initial dismay, hit the Edit HTML tab. At the top of the page you will see a paragraph that begins with a less-than sign and the words "a onblur" and ends with forward slash, greater-than sign, less-than sign, forward slash, "a", greater-than sign combination. (Sorry for the long way of express this, but if I try to type these into the editor they disappear as they are read by the browser as part of the formatting language!)
Select this entire paragraph with the mouse (it should all be highlighted) and hit Ctrl-X (hold down the Ctrl key and hit the "X" key). You will see it disappear from the page. Go down to the bottom of the page where you really want the photo and hit Ctrl-V (hold down the Ctrl key and hit the "V" key). The block of text will appear there.
Hit the Compose tab and you will see the photo at the bottom of the page.