It would seem that my image issue is a known issue.
Users who have their Picasa Web Albums language set to a language other than “English (United States)” will not see their albums of photos uploaded through Blogger.
I changed the language settings in Picasa to English (US) this morning, and edited my blog posts, and, voila, the pics are there (or so the husband says). Funny how, though, the pics do show up in the RSS feed and email. *shrug*
This does mean that I can continue using LiveWriter to update my blog and I can continue hosting the blog here at Blogspot. That makes me happy.