WYSIWYG Editor Problem

I have noticed a problem with the WYSIWYG Editor I created, however the problem is also on Bruce’s. If you insert an image by clicking on the editor page, (Such as the emotions on this page) then apply a link to the image, the image then disappears however it is still in the code but the user can see this unless they were to view the code. However if there is a built in toggle and you toggle to the HTML code then back to the Design view the image will be back again. Has anyone else come across this problem?

Thanks