When I add an image to a news article it doesn't link whatever Link type I select. Is it just me or others also having the same issue?

Here's the link: http://dagloos.com/lust/index.php?p=news&category=blog

Seems to work for me as intended with different links:
http://www.zenphoto.org/index.php?p=news&title=tinyzenpagetest

Ah, I discovered when I select the option 'Sized image/multimedia item' it just doesn't work.

Sorry, I cannot not reproduce. Just tried on the page above, last image embeded.