I've just created an improved image widget for the MarkItUp editor[1]. Instead of being prompted for an existing URL for the src attribute, a file upload form is created. The form target a hidden iframe. An online script should return the URL, as well as the final width & height. When the iframe has loaded, the dta is used to create the img tag. Voila!
You can see the code here: http://pastebin.ca/1763467 This example requires both jquery.loading & jquery.json (and a 'cancel' button image). I fully expect that others might want to do things a little differently. b [1] http://markitup.jaysalvat.com/home/