If your image is too big, it won't upload. I use Microsoft Office PIcture Manager (I think it came with MS Office), to compress the picture. Then blogger has absolutely no problem. If the pic is over 1.5 Mb, I find it's too much of an issue. Besides, you only have so much space with blogger so it's better to compress the pics so you can add many.
If you have pic manager (check by right clicking on the pic and select Open with==>Microsoft Office Picture Manager), then it's very easy to compress. PM me for more details.
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