I've been trying to find an answer to this for some time with no luck.
I contacted the author of that course and he was kind enough to reply. He said that all he did was copy and paste the text and images from Pages into Course Manager. I have tried to replicate this but it simply does not work for me. I've tried it on a Mac with Pages & Safari and on my PC with Word/Google Docs & Safari with no luck. I've found that links and bulleted lists do copy fine but no matter what I try, I cannot get an image to paste into a Post.
I've contacted Apple Support and was first pointed to the Add Material for an Assignment. This, however, only adds a link to an image... it does not display the image in the Post. I have since replied to them with a screen shot and will hopefully hear back soon.
Have you made any progress with this?
I received the final word on this issue from Apple Support today:
Ordinarily, HTML code contained within the body of a post is stripped out. This happens so that the iTunes U app can properly display posts and avoid unexpected behavior.
In this case of the post from South Kent School, the author has somehow circumvented this. It is not a supported feature of iTunes U, and we're working on fixing it.
I have managed to include web based images. I have used Skitch to publish them and iTUCM will then accept the images by simply dragging them from the browser (any web based image will work) into the postings section of iTUCM.
If Apple changes the way his works then I guess the images won't appear!
Of course the IOS device needs to be on-line to see these images.
It seems odd that we can't add images into posts from the materials library. But I guess someone has a reason for this!