When trying your example on the demo site I do not see your problem, however i see others.

 

When inserting from the Gallery, the alt element is missing, only the image src is there

When inserting an image thru insert image you supply height, width, alt and border

This does not happen when using the XML Demo, except that the element border does not appear from the gallery insert

 

The two are not consistant

 

Another really wierd things:

Using http://www.cutesoft.net/asp/EnableAll.asp

from image gallery insert the picture of the woman with hands at the bottom of the page

 

then without doing anything else, insert from the insert image the create.jpg

 

select the create image then using the vertical scroll bar on the pane, scroll up

 

why does the 8 select nodes around the image appear out of frame?

 

This does this only (so far) in IE, firefox does not do this

 

You still have the missing space in <br/> but you do put it in <hr />

 

RC