Jennifer has it right. The "insert image at cursor" button is a bit misleading. It basically puts the picture directly after the last letter, that is before the cursor (read multiple times to understand)
So, after you insert the image, you must go back and add your spaces (carriage returns).
And, Cameron has it right aswell. If you right click on your pictures above, and select properties. You will see the description you entered which is only shown when the picture does not load. You have to manually put text before or after the image.