You can update the blog images allowance from the administrator tab, by clicking on Configuration and then changing the
Max Directory Size (MB) from the default of 4MB which is about the equivalent of 1 high resolution photo to 200 MB.
See the lotus connections Wiki: http://www-10.lotus.com/ldd/lcwiki.nsf/dx/Specifying_sitewide_setting_for_Blogs_ic301
Weird that the IBM Lotus Connections wiki is a domino .nsf isn't it ? :)