Well, looks like I have come full circle here. My experiments with WordPress started when Mike Jones remarked that there were image alignment problems in his WP posts.
And yes, it's true. If you use WP's default visual editor in Internet Explorer, upload an image, then try to set image alignment, like this:
The image just becomes two tiny little dots, like this:

And it's not just in the editor. The final post displays like this:

Yes, I do know the solution: Use FireFox instead of Internet Explorer, and/or work directly on the HTML code.
BUT, what if you are creating a blog with multiple authors? I want the process of posting to be as easy and effortless as possible for a contributing author. I want them to be able to use whatever browser they are used to, I don't want them to have to download, install (and pay for!) third party software such as BlogJet, and I don't want them to have to worry about tinkering with the code under the hood.
Anyone who is running a local blog with contributing community members already knows this: If the process of writing on that blog is a pain in the arse, most people just simply will not bother. In fact, on NelaLive, which is on TypePad, I have found most will not even stick around for the registration process. I need to set up the login and password for them. (But that's a story for another day).
So, my Quest over the last few days has been to find a way to "fix" WordPress so that contributors can write, add images, and get on with their lives.
I have spent hours! (way too many hours, in fact) experimenting with different WordPress editor plugins.
So far, it looks like WYSI-WordPress comes closest to fixing the Internet Explorer/image alignment issues. It places an additional image icon on the toolbar and changes the image uploader. After uploading the image, you then use the standard icon to set alignment/text wrap.
See, it worked:

Well, it almost worked. I lost the right alignment in the completed post. But this sure beats two dots:

WYSI-WordPress also give you a complete assortment of Smilies. Now ~that~ might be dangerous.

It still takes a few more steps than I would like to get images properly inserted, so my Quest is not yet over. If any WordPress experts have other wysiwyg editor plugins to suggest, I'd love to hear from you!
Oh, and in case you are wondering, I have no intention whatsoever of moving http://www.nelalive.net off of TypePad.
I absolutely could not get the photos right in wp so now I use blogjet and it is easy to do.