I knew you'd eventually get around to asking this.
I've looked into this a number of times over the years and could never come up with a viable solution.
The problem isn't being able to upload images for blogs, the problem is with managing the images. In order for images to be manageable they would need to be added to an individual user based private photo album that users could access and manage their blog images and do things such as get the URL link code for the image to include in a blog post, and edit or delete images, etc.
For example, say a user uploads an image then decides they want to change the image or if they uploaded the wrong image and instead upload a different one, without the user being able to manage their images ALL images including old or redundant images won't automatically get deleted and will remain on your server.
In order to host images for blogs you would need to develop a special private photo album attached to each user's account where you'd basically be providing image hosting, which would be far too complex and not very practical just for being able to add images to blog posts.
I've researched this rather extensively and found that being able to upload and self-host images for bbcode based blogs and forums has been asked and requested many times across the web. I discovered that most use and recommend exactly what the "Etano blog_images_mod" does, which is adding a link to the image from another source, such as image hosting sites like Imgur, Free Image Hosting, Flickr, etc. Which are far more feature rich and capable of managing photos than what you could provide.
The bottom line is ... not everything is always as simple as one may think.