Well, yes, it works, but there isn't an upload process, so I thought the image is linked to your local drive-- which is useless.

In closer inspection, the image gets transformed to a base64 encoding (data:image/gif;base64,[...]) which is useless in this context.

With the new HTML5 file upload feature, there's the possibility that you don't see the upload process (although it may be not the best way to do it for bigger images).

Also, they're still working at the image plugin, so I think it will be improved.

As mentioned before we are working on the image plugin. We separated the functionality of uploading and image handling. You can find some information here http://aloha-editor.org/wiki/Drag%26DropFiles Bigger images can be resized on the client side and are then uploaded. (See the code sniplet at the bottom of that page)