You've got it right, but your closing tag is missing a slash: [/img]
For a thumbnail you have to embed the image tag inside the url tag, with the thumbnail address in the image tag and the large image address in the url tag: {url=http://...}{img}http://...{/img}{/url}
Click 'edit' on the above post to see what it all looks like.
Why not just use the image and link buttons in the toolbar, or better yet, the upload feature?