works for me very nicely.
I looked at your site. My site generates the following HTML:
<p><img src="http://www.comfamiliar.org/images/subsidio2.jpg" alt="" title="flitter2.0" width="200" height="200" class="alignleft size-thumbnail wp-image-255"></p>
whereas your site for some reason HTTP encodes the html:
<p><span style="font-family: Verdana, Arial, Helvetica, sans-serif; line-height: 17px;"><img src=”http://www.comfamiliar.org/images/subsidio2.jpg” alt=”" title=”flitter2.0″ width=”200″ height=”200″ class=”alignleft size-thumbnail wp-image-255″ /> </span></p>
something on your site is wrapping your img within a SPAN and then removing your "<" with <, etcetera.
It could be you pasted that in the visual editor. Try pasting exactly what you have posted here, but in the HTML editor and let me know.
thanks