Kompozer version 0.8b3 (20081229)
Main menu: "Insert - Image" opens the "image properties" pane. Then you can "Browse" to the image location you want. "Select Image File" pane opens showing the default directory in which to search. At bottom right of the pane, the default is (correctly) "Image Files". However no image files are displayed. In order to see the available image files, I must click to change the filter to "All Files" - whereupon all the JPEGs etc become visible. This is obviously the wrong way round. When "picture files" is selected, "picture files" should be displayed!!!