Just with the installation of ckeditor the image upload option is not available, install IMCE and then edit the ckeditor.config.js in which uncomment the following lines

//config.extraPlugins += (config.extraPlugins ? ',imce' : 'imce' );
//CKEDITOR.plugins.addExternal('imce', Drupal.settings.ckeditor.module_path + '/plugins/imce/');

In order to add the toolbar button, simply add

['Link','Image','IMCE']

in

config.toolbar_DrupalFiltered = [
    ['Source'],
    ['Cut','Copy','Paste','PasteText','PasteFromWord','-','SpellChecker', 'Scayt'],
    ['Undo','Redo','Find','Replace','-','SelectAll','RemoveFormat'],
    ['Image','Flash','Table','HorizontalRule','Smiley','SpecialChar'],
    ['Maximize', 'ShowBlocks'],
    '/',
    ['Format'],
    ['Bold','Italic','Underline','Strike','-','Subscript','Superscript'],
    ['NumberedList','BulletedList','-','Outdent','Indent','Blockquote'],
    ['JustifyLeft','JustifyCenter','JustifyRight','JustifyBlock'],
    ['Link','Unlink','Anchor','LinkToNode', 'LinkToMenu'],
    ['DrupalBreak', 'DrupalPageBreak'],['Link','Image','IMCE']
   ];

Clue's origin?

It was right under your nose, this was included inside the readme txt of the ckeditor module. Other options are also there... have fun.. :)