Not knowing what you are working with, on my Windows 7 computer there is a attach files button on the lower left of the reply window. Click button, browse your image and click open--done. I don't see where there is a need for drag and drop.
Looks like this is sorted but let me know if not. Denny is right, there are two ways to do this, attach files, or click the little image icon to drag and drop an image. Previously it was asking for a URL for an image but I think (hope) I've fixed that now!