Here's a workaround to adding a picture to your 7.0 blog posts. In the individual post, on the Content page, also insert your image somewhere in the verbiage. It'll show when people read your blog page.
I'm in the middle of working on ramping up my Squarespace SEO so I can take advantage of better margins and keep running into these kind of issues. May I suggest Squarespace be a whole lot more proactive in this area. Saying that I have to spend time researching and finding a third party workaround and possibly need to spend additional funds is not an answer. Why not just move to another platform that is more all inclusive? That's what my SEO advisory service keeps hammering on. Think about it! Time to step up the game Squarespace.