Jezston - are you using a http reference to post the image?
If so, can you paste the URL here as I suspect it may be an issue with lack of extension?
If the URL doesn't end with an allowed file type extension the board won't allow it to be posted.
For example:
http://www.cyclechat.net/images/thisshouldbeallowed.jpg - should work okay as it has a proper file extension.
http://www.cyclechat.net/img.php?id=374663764 - shouldn't work as it doesn't have a valid file extension.
The way to get around this is to open a new browser tab, paste the URL to display the image, right-click and save it, then add it as an attachment (use the full editor).
One uploaded you'll see a link - ADD TO POST - this allows you to directly insert the attachment and display it inline, as opposed to the previous thumbnail view, so visually it should be very similar to posting it using insert image.
Let me know how it goes.
Cheers,
Shaun