People might know this solution, but I ended up finding it on Drupal so I decided to share it with all the wonderful mu-folk.
When using a non-vhost setup (and rc1 and before), embedded images for a post work on the individual post page, but not on the front of the blog. This is because tinyMCE converts the url from absolute to relative, and when the blog is a subdir, ../files on the front page really messes things up.
To fix this, open tiny_mce_config.php in wp-includes/js/tinymce, and change (around line 70):
convert_urls : true,
relative_urls : true,
to
convert_urls : false,
relative_urls : false,
All previous images will have to be re-added, but this way all images have an absolute url so the posts will not have any broken pictures.
Let me know if you have questions, I hope this helps.
