Here's what you do:
1. After you have uploaded your photo, click on the "edit HTML" tab at the top of your Blogger post editor (it is the blue writing next to the "Compose" tab:
2. The HTML editor looks like a whole lot of code. If you normally post your photo first in any entry, look in at the top of the code for something like similar to:
a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhX_RDXngRd8EjzqUsOLFueD4ZCq2T6YuYhxzDSCDQ9f0Afw-PnibSjbxs7f-lv0cWCI2qxaYTPXRY9Gg_EfTDh9WYqqf4rlikJVHs_3hxaYJYjdtwMiHV3fHC5F5U4DVDNJsd5CJ92Lsg/s1600/sh13.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"
This type of code is for an image. Here is what that screen will look like:
3. In two places you will see a web address listed for your image. When you upload a photo from your hard drive, it is then hosted on Picasa. That is the web address that you see in your screen. In two place in that top code, you will see an address similar to this one:
https://lh4.googleusercontent.com/-N5iFpayGPBk/TW-WpTbryYI/AAAAAAAAA3A/B0GxbXxQyhQ/s1600/sh13.jpg
You will want to change the parts that I have highlighted in RED to the following:
http://lh4.ggpht.com/-N5iFpayGPBk/TW-WpTbryYI/AAAAAAAAA3A/B0GxbXxQyhQ/s1600/sh13.jpg
4. So, in short, go into the html editor, and change the web address of your source photo from https://....googleusercontent.com... to http://....ggpht.com...
Hope that helps, it is working for me!