inline image detection based on extension is working as well... it detects if the extension is ".jpg" ".gif" or ".png". if it is any of those, it becomes an inline image by default. the link text will be set as the alt tag.
select url radio button to make it a link instead.
get it here
this is going to be released as 1.4.5 if no one finds any bugs in it by tommorrow... so please do test it.