Image upload in posts problem

[Davey-UK]

Here is the scinario, that i have recently come across.

I use vB4.2.0. When making a post on the forum, i click the "Insert image" icon.
(Please don't confuse this with "attachment" icon.)

Here is the problem:

If i type some text, then press enter, so as to insert the image on a new line.
Now i choose an image from my pc and it uploads, the image doesn't automatically show as a thumbnail inline in the editor.

If i don't press enter for a new line, then upload the image, it shows up.
Then i simply press enter and the image drops to the next line. No problem.

All my settings are fine in ACP, it just seems to be a problem caused by trying to add the new image on a new line. Any ideas folks?