BuddyPress.org

Very possible in multiple ways, to embed an image in status updates.

1. Install @r-a-y‘s handy plugin, oembed for buddypress: https://buddypress.org/community/groups/oembed-for-buddypress/ Whuch gives you the ability to just post the link inside the update and it will appear. It works for videos also.

2. If you don’t want to install that plugin, you can just put the image inside image src tags: ``

There is also an album plugin which allows your users to upload pictures in their profile albums, and then insert them into status updates.

Good luck!