I tried to leave a comment on this Development Seed post, but logging in then denies me access to the page?
I login (using a Drupal ID -- Boris Mann@bryght.com), I can no longer see any content. Do you have "access content" turned off for authenticated members?
In any case, pretty much all the points are addressed by HTMLArea's UploadImage plugin (you just need to enable it and allow permission). It works both with James' new image module, as well as the existing one in contrib.
- UploadImage plugin does this already, as well as being able to pick from previously created image nodes
- UploadImage also does this
- HTMLArea just does the HTML. You can even drag the corners of the image to resize it. So, no filters. You can use the "Filtered HTML" input filter to allow tags, but disallow other formatting.
Oh yes -- and cut and pasting an image from other web pages also works, except that (of course) you are including the image from a remote URL.
Not to say there isn't room for improvement. James' current image module doesn't handle galleries, but the good news is that Moshe is building a dedicated album module to handle this (with tagging!). Also, the UploadImage plugin only pastes in full size images -- it needs to be extended to choose between full size and one of the generated thumbnail sizes, as well as choose to link to the original, full size node.
For those that don't like HTMLArea, for whatever reason, the UploadImage plugin might be included with a standalone module that handles filter insertions instead.