I had the same problem. Turns out Picasa Web Albums, which Blogger uploads your images to by default, was doing maintainance. It was only supposed to be for half an hour but instead they took over an hour!I have since uploaded an image (they started when I was in the middle of writing out a post too! Ahhh!) and it all worked properly so you should be safe to give it another try now.
Another reason I don't use internet browser based blogging. :(I use Windows Live Writer to do my blog posts. :) Try it.
Ooooo pooo! Love the ladybug :)