I've been thinking about something lately: When I upload a picture of myself to the "Show Your Face to AG" thread, I have to upload one of my pictures to Facebook or Photobucket first. Personally, I think it would be easier to upload a photo from one of the folders on your computer when you post a picture as part of a comment.
It'll never happen, I have to say. This is asked at least once a week and sometimes more, and the answer is always no, it'll never happen. The servers cannot handle it, it'll take away from the theme of the site, and people can upload pornography.
As other people have said, it would be pointless to add this feature to AG when it would just cause the site to go a lot slower.
Not only does it have to cope with uploads, but also with storage, and over the years the amount of images will accumulate and it will end up a few gig worth.
It isn't worth the hassle when it is just as easy to upload to Photobucket or equivalent. Just don't be lazy.
Also, I think in the end the pornography issue would not be a problem, because there is no difference in getting it off Google Images or uploading...it would still be a problem when it was posted.
AG could...possibly...get in trouble if there was some kind of copyright issues...