You can't link to something that's on your hard-drive, it needs to be hosted somewhere.
when you make a post, you can click the "Manage Attachements" button toward the bottom of the page and insert pictures that way. That will upload it on the Lat-G server, and it will show up as a thumbnail you need to click on. Otherwise, you can find some place to host it (that allows hot-linking) and do what you did with the [img] tags.
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