Awesome
A new version is being developed in the dev-3.x branch
Inline Attachment 2.0.3 
Adds upload functionality to a textarea or CodeMirror instance by either drag-dropping or pasting (only in chrome) an image inside it.
It's similar to pasting of images in Github.
Getting started
The latest versions are available here
Bower
The package can be installed using Bower
bower install inline-attachment
Documentation
Documentation can be found on ReadTheDocs
Handling image uploads
The Demo folder contains an example in PHP on how to handle uploads.
Build
To build the project you need node, npm and grunt installed. These tools can be installed on Ubuntu as follows:
Follow the Node.js guide: Node.js installation
Go to the project folder and run the following:
npm install
grunt
This should build the project and the files will appear in the dist/ folder