By default WordPress lets you take quite few steps for adding images from your library to your blogroll items.
After enabling you'll find the upload icon at the Image field.
Click that to select the image you would like to use for that particular link..
Since it's using the uploader screen you can upload images from the spot..
Add to post button and the image is added to the image input-field...
Upload the contents of the folder to the wp-content plugins directory.
Activate the plugin through 'Plugins WordPress.
Browse the code, check out SVN repository, or subscribe to the development log by RSS...
Added support for Media Upload screen in the version of WP.. 1.0.1.
Had to change number to make sure the download of this plugin worked properly.
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