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Yes a bug. The character under the cursor when it is in that position is the '<' of the ending p tag not the 'm' as it is after the 'm'. This makes Sigil think that you are in a tag and therefore not allowed point. I will have to find the right place in the Sigil source code and handle this as a special case.
The workaround is to add a space before the ending p tag and put the cursor before that space then do the insert image and if you want delete the space afterwards.
I will get this fixed in time for 1.8.
Thank you for the bug report.
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