Picture on homepage in an created article

open admin/articles.php
find:
theme_advanced_disable : "link,unlink,insertanchor,image,subscript,superscript,help,anchor,code,styleselect",

remove:
,image

from the list inside the quotes....
anything else you may need.

Once complete you can now insert your pics

i have done that but how do i insert my pic so it can display on the frontpage as thumbnail of of an article?

I have created some articles who are placed on the default page. What happens to those if I remove the 'image'?

I use an external editor, like scribefire: http://www.scribefire.com/ to create my posts, I use images that I store online and let the editor point to them. Then I get the code from code tab on the editor and paste that into my articles using the html editor. It is alot easier.