Many people are sill experiencing issues with the image upload function in Wordpress 2.5.1. The issue centers around placing images into posts with links to the image itself or to a page with the image on it.
After uploading in an image, you are given the option to place it with None, File URL, or Post URL. File URL links right to the full size image by itself. The Post URL links to a stand alone page with only the image on it. None does exactly what it sounds like.
Well, in IE7, that doesn't always work correctly. As a matter of fact, it rarely works. However, in Firefox and all Mac browsers, it works just fine.
It is a known issue: http://trac.wordpress.org/ticket/6469
It apparently will be fixed for Wordpress 2.5.2