I've had more problems uploading photos with Blogger and have seen some really bizarre behavior. I just finished my latest World of Good post, directly below this one, after fighting with blogger for a half a day trying to upload photos. I had fully written the post and was just trying to insert the pictures.
I discovered that if I opened and edited a previous post with much less text, the photos were inserted instantly. I uploaded them to that post, published it, and then cut and paste moved them into my WOG post. Weird.
When it comes to unstable products, Google is just as guilty as Microsoft.