You are right, thank you Dr. CSS. That does seems to solve it. For others, this is how to do this - in admin go to Extensions -> TinyMCE WYSIWYG. Then hit the Advanced tab and change "CMS-linker link-style" from {cms_selflink} to style.Dr. CSS wrote: The problem is that the self_link uses {cms_selflink} style, go to tiny admin and the advanced tab and change the self link to style and it will use the image instead of the text of image link to make a link...
From then on, when you select an image and apply a link to it, it works without an error.
I notice the bug report mentioned by blast2007 is still open and in fact there seems to be some argument over whether it really is a bug at all.