I have just switched one of my site blogs from BBcode to wysiwyg editing. Unfortunately, this removed the ability to insert links or images into blog entries. The solution is to add a few lines to /blog/_config.php:

HtmlEditorConfig::get('blog')->insertButtonsBefore('advcode', 'image', 'link', 'unlink', 'separator' );
HtmlEditorConfig::get('blog')->removeButtons('tablecontrols');
HtmlEditorConfig::get('blog')->addButtonsToLine(3, 'tablecontrols');

HtmlEditorConfig::set_active('blog');

Sources for this idea included:
SSbits website: http://www.ssbits.com/customising-the-wysywig-editor-in-v2-3-2-tinymce/
SilverStripe docs: http://doc.silverstripe.org/htmleditorconfig
The comments in /sapphire/forms/HtmlEditorConfig.php

Hope this helps somebody. Let me know if is causes problems. I'm using SS 2.4 and blog 0.4

cheers bro... just what I was after :)

Just incase anyone ants to activate the media plugin to add dyoutube videos..

HtmlEditorConfig::get('blog')->enablePlugins('media'); // enables plugin
HtmlEditorConfig::get('blog')->insertButtonsBefore('advcode', 'media' );

Thanks gents, but the image button is nearly useless, since it only allows one to type in a URL, and not upload an image. wtf? any thoughts?

It's the default image button for the editor, is why.
The one in the CMS is a custom plugin called ss_buttons. But it's specifically designed to work with the CMS...

Unfortunatly I think you're going to have to hack around the issue to get uploads that land nicely in the assets folder.