Question:
When uploading .png files in the Publish area, it inserts a link rather than image code. What’s going on?
Answer:
This seems to only occur in IE and derivatives thereof (such as Avant). It appears that IE doesn’t send the correct MIME type (image/png) and therefore EE believes it is receiving a non-image file.
I do not know of a workaround for this, other than downloading a good browser.