There might be some kind of mod or something over at Expertzzz downloads. Only thing is that means $'s and the potential for a bogus product over there.
Dolphin 5.6x is old now, but it had a nice feature that your member could create an album like. They could create something like family pictures, party pictures, Christmas pictures, or whatever and then upload photos related to the album/topic. This was actually a nice feature and I wish they still had it. Maybe in the next release Dolphin 7 or Posidon maybe we will see this again. Lots of things I would like to see, but that is another story.
I did find a 3rd party plugin for the tiny_mce editor we see in dolphin. The little editor for typing a post. Right now we can attach a picture to a post, but it has to be stored somewhere on the internet. We just tell the editor where it is located. This is confusing for many members and some do not have a place to upload it to. Some people do not understand the whole re-size process for images to make them fit well either.
The plugin I found will allow members to upload a picture directly to your hosting account in a location you specify. It will also re-size it or have the option to re-size it to fit better with a simple check. You can also limit the file types to .jpg, .jpeg, .gif, .png, etc. Anything else will not be allowed to be uploaded.
You specify the directory where they are stored on your host account. But this means 777 folder permissions necessary to make the upload writable to your hosting account. So there is some concern with security.
The main drawback I noticed with it is everyone's pictures are uploaded to the same folder/directory. Then, they pick the image they want to insert. This might cause confusion and you probably want to disable deleting pictures by members because they could delete someone else's thereby making the photo not available.
It could probably be modified some, but I think it would be quite a bit of work. I haven't really played around with it a while due to the drawbacks.
It would probably come in handy for some sites, but others not so much.