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I have always used the blog to upload and insert my pictures, though I use movable type in the past. But with Wordpress, just create a direcory called "uploads" in the content directory and chmod it 777(something I just learned). Under the post area, there is an area to upload pictures and insert the image into your post. I believe it will make thumbs, but I just use smaller images anyways.
I just find the picture I want, save it to my hard drive, go into wordpress insert image and write post. Think it's less time that doing it by hand. Course thats just my opinion.
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