Clicking 'Insert' produces <p>&nbsp;</p> in HTML source

When inserting an image in my WYSIWYG editor (TinyMCE), the image will appear to be inserted but when reviewing the HTML source (before form save) it appears that only <p>nospace</p> tags have been created and not the entire <img> tag.

This behaviour happens 50% of the time (not yet clear why). After trial and error an image can be successfully inserted in the editor with corresponding source code. Below is an example source whereby the first image was successfully inserted but not the second:

<p><img src="http://www.example.com/sites/default/files/imagecache/Landscape/images/news/image.jpg" alt="" title="" class="imagecache-Landscape" /></p>
<p>&nbsp;</p>