Images can be uploaded directly into a Text field in an exercise by clicking on the "Insert/edit image" button.
Next to that, images and files can also be uploaded under the General tab.
Don't forget to click on "Start" to start uploading your image.
After the upload, a link will appear that you can use to reference the upload.
Under the earlier mentioned "Insert/edit image" from the editor menu, you can find an image list containing all the images uploaded under "General" from which you can choose your images by filename.
If you only display a small image but you want the student to be able to zoom it, you can set the Dimensions in pixels (or scale with the mouse after inserting the image), and apply the class 'Zoom', also available in the insert/edit image from the editor menu.
Add documents to the exercise
It's also possible to allow students to download a document by clicking on the image in an exercise. To do that, go to the tab "Texts", Insert, Link.
Here, you can apply a class to show a download link next to the image. Available classes are document, download document, excel document, pdf document, ppt document, word document.
More technical information can be found here, under exercise types.