I self-host and blog via wordpress, but the way I handle images is that I place them on Flickr, and use the "grab HTML" feature to link to the images there. Storage is free and unlimited, though I do pay $25/year for my Flickr account to avoid limitations there. I find it wholly worthwhile.
I hope you're able to find a way that works for you, as your blog is absolutely one of my faves and one of my first stops when I'm surfing through the blogroll. Thank you for always sharing beauty.