I've been fighting with PHPNuke off and on for awhile about incorporating images into my posts. I've added the img tag to the $AllowableHTML in config.php, but sometimes it will still mangle my tags. I think I've finally solved the problem.

In mainfile.php, there is a function called check_html. In this function, there is a line that says "$str = eregi_replace("]*)[[:space:]]*>", ', $str);". This comes before it checks the AllowableHTML. By commenting out that line, I seem to have solved the problem.