The new picture insert method seems to be working well for people. Not only can you insert photos directly into your blog by clicking the icon, but you can place them left, right, or centre. If you find that your layout gets a bit messed up (with a big space at the top), you can try this solution suggested by the Blogger folk.
For me, however, Hello will continue to be my preferred method. Using the direct insert method, as I did above, Blogger seems to resize the photos according its preferences, which may not be my preferences. Hello, on the other hand, gives me a lot of control over the size.
After Sue's comment (thanks for that), I had another look at inserting pictures. You can choose amongst three sizes: small (200px), medium (320px), and large (400px). The above photo is 320px.