Clue to Problem?
Not sure if this will help you with the solution; however, I noticed that if the image already exists in the /userfiles folder on the server. The image populates the editor correctly and the Source code for that image looks like so:
<p><img width="96" height="151" alt="" src="/userfiles/avoderm.jpg"></p>
however, if the image does not already reside in the folder the Source code looks like so:
<p><img src="/userfiles/catpic.jpg" alt=""></p>
I receive a message stating that my image has upload; however, it is not in the /userfiles folder??
Hope this information helps...