I think if you use the 'Insert Image' function, it will upload the pictures from your computer, and attach them as thumbnails, but if you upload the picture to the internet, or link it from the Internet, and use the [.img] tags, it will show as full size.
Even though now as I tried to test that theory, it didn't work. If I remember correctly, not all threads allow full size display either. Pretty sure the diary section does, but this thread doesn't seem to. In my diary, it definitely works (http://weight-loss.fitness.com/threads/58716-Third-time-s-a-charm-supposedly/page7) - picture of the cake shows full size.
So it depends on whether you attach or insert the image, and which thread you're trying to post in.
Yes, the 'Insert Image' function seems to do it, not attaching them.
But I just figured out the following; you can attach and then insert the images via the attachment itself without need for third-party hosting (took me a while to realize this was possible )
The procedure would be; Attach picture to a post > PREVIEW said post > Click on attachment and copy URL > Insert as image.
It won't work on this section of the forum but I just did it successfully on another thread so it definitely works.