This came up toward the end of yesterday's meeting so I thought I would post these links:
http://drupal.org/project/tinymce
http://drupal.org/project/fckeditor
http://drupal.org/project/imce
I think TinyMCE is one of the most popular JavaScript WYSIWYG editors in Drupal. FCKEditor is an alternative to TinyMCE and I like it a little better because it is a little easier to configure. It also has its own file upload manager built in, but IMCE integrates a little better with Drupal's role system.
IMCE is a file upload manager that automatically integrates with the "Insert Image" buttons in both FCKEditor and TinyMCE. IMCE can be configured with roles so that users can only access images they upload. It looks like all these modules have Drupal 6 versions, so this may be a nice user-friendly way to insert images into nodes until the ImageField module is released for 6.