I think it was a serious mistake to replace the Telerik HTML editor with TinyMCE before having an image manager plugin working... Clients aren't going to go for that! "Oh, you could upload images into Topic Pages, but now you can't?"
Come on guys... I haven't seen any problem with the Telerik editor. What was behind this decision?
The latest official release (nopCommerce 2.30) uses telerik editor and it has image uploaded. The version you're using is not released yet. And most likely image uploaded will be in the official 2.40.
TinyMCE has much more features than telerik editor. Telerik editor (in the latest Telerik MVC Extensions Q3 2011) had HTML encoding/decoding issues. Follow the next steps to reproduce it: 1. Enter some raw HTML text (in pop-up windows) 2. Submit some page with wrong data so the page is redisplayed without redirection (got using POST) 3. Already encoded text will encoded one more time
Telerik editor also always returned already encoded values to controller (it's wrong)
BTW, you can always move back to Telerik. Update only one file - \Nop.Web\Administration\Views\Shared\EditorTemplates\RichEditor.cshtml.