There have been so many people asking how to do this over in the Folksy forums lately and many people, including myself, have tried to help out by posting the code in various forum threads. The only problem with this is, that if you copy the code from a forum thread it simply does not work, even after you have edited it to suit your own requirements. Why this is I don't know, but I thought I would try posting it here instead to avoid having to send the many explanatory messages and e-mails that I have been doing lately!
So, the code you need to post an image is
<a href="link text"><img src="image location" width="250" /></a>
Copy this to a notepad file and save it for future reference. Then when you want to use it, replace link text with the URL of the page you want to link to and image location with location of the image you want to display. Leave all the quote marks where they are.
The width="250" part governs the size of the image. Typically an image on folksy is around 500px wide, which can seem a bit like shouting in the forums, so I suggest you reduce the size a little. You don't have to stick to 250, it just seemed like a good number to me!
To find the location of an image on folksy simply right click on the image and select 'Copy Image Location', then paste it into your code.
Don't forget that you can edit a post until you get it right - or delete it all together if it all goes horribly wrong. Which of course it won't!
I really hope that helps, I'm off to test it now!
Edit: And it works a treat!