We don't have restrictions on dimensions of images, and file sizes can be as large as 5MB. I'm not too sure why you are having difficulties.
What browser are you using? What is the error being displayed when you attempt to upload the image?
I'm using Firefox - haven't tried another browser. I hit - 'upload a file' at the bottom of the page... I get the file folder browser - and I can see pdf's, but that's it.
Which is what I did, did you look at the screenshots I took?
I displayed the image I uploaded 3 of 4 different ways, thumbnail, full size (both of these are the <attach> feature), then as a straight unmodified upload.
Assuming you are getting the browse function (which is not clear at this point) are finding your file OK?
Your picture I did differently on the next post, the 4th way. I captured where the image was stored then put it between the <img></img> BB codes.
I just tested file uploading in FF and it worked properly with for me (version 39).
I believe the uploader does use flash, make sure you have it installed and it's working with FF (http://www.adobe.com/software/flash/about/)?
Or possibly an add-on is interfering?