I sometimes use word to publish to my blog, it allows me to do the writing offline and then publish it when I have grammar and spell checked the post. (Believe it or not I sometimes do this J).
So this is how I did it. Firstly I got the picasaweb link that I have my images (if you are logged in to your gmail account click settings, then go to Picasa web albums, click settings)
Then find the image that you want to include in the blog. Right click on it and get the image URL. I my case I used a coffee cup
Then in word go to insert -> Picture. And paste the URL in the file name box, then click the drop down arrow next to insert and select "Link to File"
This does mean that you have to have the image on Picasa Web though.
After posting you will probably have to go and re-format the image, in the case above I went to edit the post and then changed the width to 150px. If you publish a picture of the correct size that is a different story.