Install the modules

First, install the Asset module and the TinyMCE module. Download (or checkout from CVS) in any of your modules directory (like sites/all/modules). Enable them in your Drupal's admin interface at admin/build/modules.

Download the TinyMCE (2.1.3 stable release), unpack and place it on tinymce/ module's directory.

Configuring TinyMCE

Now, we need to install the drupalasset plugin in TinyMCE. Just copy the directory drupalasset (from asset's directory module asset/tinymce/) to sites/all/modules/tinymce/tinymce/jscripts/tiny_mce/plugins/. Edit the file sites/all/modules/tinymce/plugin_reg.php and add the following lines:

$plugins['drupalasset'] = array();
$plugins['drupalasset']['theme_advanced_buttons1'] = array('drupalasset');
$plugins['drupalasset']['extended_valid_elements'] = array('img[class|src|border=0|alt|title|width|height|align|name]');

Now go to Administer > User management > Access control and give some role tinymce access permissions. Now you can go to Administer > Site configuration > TinyMCE and click Create new profile. Fill in the setting push “Create profile” and your done, now you can use TinyMCE to add assets to your content. In the edit form, enable the drupalasset plugins in the Buttons and plugins fieldset.

Only local images are allowed.

Configuring the filters

You need to enable the filter Inline file assets in your filters (in admin/settings/filters) to be able to insert assets in your posts, as mentioned in the asset installation documentation.