The tutorial, first post in the thread, states: "Select the IMG Code URL, second from the top, and paste it into a post or PM."
If you use the IMG CODE URL, you cannot use the message window's Image tool.
The tutorial goes on to discuss how do deal with a picture that exceeds the forum maximum dimensions. In this case you copy tinypic's Direct Link for Layouts and paste it into the Image tool and provide a size parameter.
Not all host sites provide the same URLs. This tutorial for TinyPic.Com talks about using one of two URLs, depending on the size of the picture. If the picture does not exceed recommended maximums, then you use the IMG URL and paste it directly into the post. If the picture is too large, then you use the Direct link, past it into the Image tool and provide a width parameter. Using the IMG URL in the Image tool, as I believe you did above, will not work. Similarly, pasting the Direct link directly in the post will not work.
If you look at the syntax of these two URLs, you can probably identify the correct ones on other sites.