If you experience an issue with the option to insert an image from SharePoint being greyed-out, follow the steps below.
1. Go to Site Settings and make sure the Publishing feature is enabled at both the Site and Site collection level
If the step above does not resolve the issue, also make sure that the home page is not the default page, default.aspx. If the home page is the default.aspx, recereate the home page and make sure it is in the pages folder. After actviating the Publishing feature and recreating the Home page you will notice that the Insert picture from sharePoint option is working fine.