It could mean at least a couple of things. But fundamentally, you need to include the full domain name of the site the image is located on, as well as the full path to said image, with the actual filename of the image including the file extension. If you are using Firefox, then you can right-click on the image itself, and select "Copy Image Location", then right-click between the [img] tags and select "Paste" - that always works for me. Sites that use a lot of scripts might hide the URL leading to the image. Therefore you might be posting a broken link instead of the correct URL that leads to the image.
All of that said, I just tried it myself and have the same problem you describe, so it looks like a problem with this
I don't know the answer to your second question though, as it depends on the types of images files the forum software accepts.