Seeking WYSIWYG editorwith image upload, not URL link

I have a D6 site with several content types where registered users can create public posts. I am using the WYSIWYG API, currently with TinyMCE. The only feature lacking is the ability to upload images; the only option is to paste in a URL to an image from another website (ie Flickr, etc).

First, my audience is not very sophisticated about computers. Most visitors may not have a Flickr or other account. And the Text editors I have seen that have image upload ability make the user go through a GUI comparable to the Space Shuttle's control panel.

My second issue is with having pages and pages with links to external content. Is that a wise move? If the server the image is on is slow, my page load will be.

I also wonder how having hundreds (or even thousands) of links to external images, most of them being to just a few domains like Flickr, will impact my SEO rankings. Will the search engines see that as some kind of linkback scheme and penalize my site?

I tried using the Insert module as per instructions (also added and enabled Filefield and Imagefield modules) but no "Insert" field type was available. And while the Insert module claims to allow the WYSIWYG module to add image upload capabilities to some of the text editors (TinyMCE is one of the listed ones), there are no instructions for enabling the feature - and it certainly was not enabled automatically. There is another image upload module which also claims to work with WYSIWYG API, but it depends on 4-5 other modules I would need to install. Adding 5 or 6 modules to get images uploaded through my text editor seems like overkill: if I develop by throwing 5 modules at a single problem or feature, with that philosophy my server will quickly roll over and die.

Does anyone know of a simple and clean way to have my text editor upload images to my drupal installation? I don't mind switching editors if it's a relatively clean and low-overhead solution. I am having trouble accepting that this issue has not been addressed and resolved, yet I searched the documentation here very thoroughly and only found one reference.

Maybe I will try the Insert module again; perhaps if I install and enable Insert first, then install WYSIWYG API afterwards, the claimed image upload will be enabled in TinyMCE.