You link isn't to an image, but an online album (I just copied and pasted your link in a browser). That won't work in img tags. You could post the link as a link: Press the "insert hyperlink" button (upper far left button in the edit post page), and make sure your link is between the "" and "" tags:
[url]http://picasaweb.google.com/dhul34/CornStove?feat=directlink#[/url]
http://picasaweb.google.com/dhul34/CornStove?feat=directlink#
For a specific picture, you must copy that picture's URL. It should be something ending with a typical picture file format end, like .jpg, .png, .gif etc. In my browser (Opera) I just right-click a picture and select "copy image address". Then click "insert image" in the edit post page, and paste it in between the img tags:
And the preview button is handy too 