This is an extremely, simple step-by-step tutorial intended for newcomers to Dreamwidth. I myself have only been fiddling with it for a few hours, but I've found a way that works for me and I wanted to share. This might be super obvious for some people, but for those that are totally new to this stuff, I've offered up instructions.
Step 1: Go to the Dreamwidth homepage and hover over "Create" under that click "Upload Images"
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Step 2: Once you've done that and uploaded your image, you'll see this

from here you can edit the title, short description, and description of your image, though it's unnecessary for posting art. However it can be useful for keeping your things organized.
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Step 3: Copy the URL of your newly uploaded image, as seen in the "Image Code" line.

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Step 4: Hover over the "Create" tab again and click "Post Entry"
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Step 5: Click the little image icon

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Step 6: From there you should get a pop-up box.

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Step 7: In the first line, paste the URL from the image you uploaded earlier.
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Step 8: This is where you need to do some trial and error. Depending on how wide your theme is, you need to type a number in the "width" line to prevent your image from stretching across the page. Chances are, your image is bigger than your theme allows, and you need to make it smaller. This is ok! Because I'm going to show you how to still have full size images.

I chose 700 for mine. MAKE SURE THE LOCK IS ON! This will prevent your image from stretching oddly.
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Step 9: Next, you need to click on the link tab. In this box, simply paste the exact same URL. This will make your smallified image open up into its full-size when it's clicked!

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Step 10: Click ok. Add any text you want to your post. Then post it! Check your blog to see if it work! Here's an example on my blog.
Step 1: Go to the Dreamwidth homepage and hover over "Create" under that click "Upload Images"
-
Step 2: Once you've done that and uploaded your image, you'll see this

from here you can edit the title, short description, and description of your image, though it's unnecessary for posting art. However it can be useful for keeping your things organized.
-
Step 3: Copy the URL of your newly uploaded image, as seen in the "Image Code" line.

-
Step 4: Hover over the "Create" tab again and click "Post Entry"
-
Step 5: Click the little image icon

-
Step 6: From there you should get a pop-up box.

-
Step 7: In the first line, paste the URL from the image you uploaded earlier.
-
Step 8: This is where you need to do some trial and error. Depending on how wide your theme is, you need to type a number in the "width" line to prevent your image from stretching across the page. Chances are, your image is bigger than your theme allows, and you need to make it smaller. This is ok! Because I'm going to show you how to still have full size images.

I chose 700 for mine. MAKE SURE THE LOCK IS ON! This will prevent your image from stretching oddly.
-
Step 9: Next, you need to click on the link tab. In this box, simply paste the exact same URL. This will make your smallified image open up into its full-size when it's clicked!

-
Step 10: Click ok. Add any text you want to your post. Then post it! Check your blog to see if it work! Here's an example on my blog.