1) You probably just need to install Flash, try going to
www.youtube.com in Internet Explorer and see if you can watch flash videos.
2) There was a bug and we had to remove the 'From Web' tab on Windows 7. As a workaround, open a browser and right click the image you want to put into your post, click copy. Then in the editing canvas for Windows Live Writer, just paste the image. This will automatically hotlink the image for you.
-Brandon Turner [MSFT]