To upload pictures to your post first login to Dashboard and click on +New Post. The Post Editor opens and click on the blue square icon in the top frame (see arrow in picture below :)
Click on picture (Image 1) to enlarge it.
You will get a Dialog popup window in which click the Browse button and locate your picture file on your disk and click Open. Then Choose layout and Image size options. You can only upload jpg, gif, bmp and png images, 8 MB maximum size. Then click the Upload button at the bottom. The image uploads depending on the size of the file and the speed of your connection. The default position for image is the top of the post after clicking the DONE button. Click on Edit Html tab of Post Editor to see image code at the top :
The above code is for the Image 1 in this post. To reposition the image within the post select this whole code and cut and paste it to wherever you want in the post. You can also do this by clicking on Compose tab of Post Editor and using drag and drop.
Careful examination of the code shows two image links :
This will produce the picture below again ( Image2 ):
NOTICE again that the above picture cannot be clicked to produce a bigger image like Image 1 above.
At the bottom of the Upload dialog window is listed your current Storage Usage. From this you can know whether you have no more space left to upload images. If you do not have any more space, upload image file to a free host and paste this code in Edit Html tab of your post :
<img src="LINK OF YOUR IMAGE"/>
Replace the caps with the link to your picture in the free host.
PROFILE PICTURE
To put a picture in your profile use the second method by uploading to a freehost as it is easy to make a mistake while extracting image links from uploaded images in Blogger posts. Then login to Dashboard and click Edit Profile link in sidebar. Scroll down and paste your image link in Photo URL box and save.