I think this feature would be really helpful. Treating images like paragraphs introduces a break in the flow of reading and only makes sense if you want the person to actively look at the image and then return to the text. When you're just casually referring to something in the image or if it's a small image, it is nicer to have text wrapped around it, giving it a more blog like feel.
This can perhaps be accomplished with minimal changes to the markup. Something like
center (only one of the three can be used). If
r is used, then the text continues and flows around the image on the opposite side and with
c, the image is simply centered. If none of these options are given, it works just as it does now. This way, none of the existing images get broken.
If this is going to be implemented, it'd be nice if the text were also justified, as it is more pleasing to the eye. The use of unjustified text simply cannot be justified!
Extension to Joel's request:
I'd also like to extend this request to include image blocks (or whatever is the right word for it) for sequential images which need not be placed one below the other. For e.g., for a list of all Star Wars movies ever made, compare this display:
to the same 3 images, but stacked one below the other. To me, the above seems neater and takes up less space, which means less scrolling to the next part of the answer, which in turn leads to a better user experience.
In some ways, it gives users a better control of the layout of their answer without having to force them to combine their images in some image editing software. However, I can also see why this might get shot down, because even after all these years, MS Word still cannot figure out how to wrap text around an image neatly without breaking it when I insert a new image/paragraph.