AvikB, this has been requested many times and I want to bump it: maybe its not too difficult to make auto-uploading of images to imgur (or another image hosting site) like its already done for add-on submission?
The WYSIWYG editor on the forum is a plugin. and it is a buggy one. I had to modify somethings to atleast get it working. It has not been updated for years. I tried adding imgur support(with youtube video embed) but i couldn't figure it out. I have no experience with modifying or creating plugins unfortunately.
Also since the next major forum version SMF 3.0 already has a WIP editor i didn't bother.(it is been in development for 7 YEARS!!!)
For addon submission, it is a bit different. The markdown editor i used in there, i already have experience working on it. also it is much more stable. The imgur upload system is a custom php backend system that i made for that purpose.
porting that over to SMF would require some modification to this already buggy editor.... which i don't want to.
Maybe if SMF had native support for markdown instead of the BBCODE i could just use the markdown editor that i have for addon submission.