If you haven't looked recently, there's been some huge progress recently for Drupal's Media module. Jacob Singh from Acquia has jumped on board, paving the way for fieldable entities! This allows Media asset objects to be a first class Drupal citizen, alongside Nodes, Users, Taxonomy, and Comments. (Hopefully in core for Drupal 8!) Also, Dipen Chaudhary has been hard at work providing WYSIWYG support!
If you want to give it a spin, you'll need to install Drupal 7, Media, Styles, and optionally Media: YouTube. Then enable the packaged Media Core, Drupal File Module Bridge, and all the modules in the Styles section (Styles, File Styles, and Styles UI). Important: You'll also need to disable the Overlay module (built into core); they don't play well together yet.
Next go to the Media Types overview listing page at /admin/structure/media. You'll see several pre-defined types, including Video, Audio, Image, and Other. (These are not set in stone; chime in with your own suggestions!) Down the road you'll be able to add new types as well with a UI.
Click 'Manage Fields' next to Image, taking you to /admin/structure/media/manage/image/fields. This screen allows you to add new fields to Image type media. For instance, you might have a textfield for Photo Source, or a checkbox to demark whether an image is a photograph of an animal.
Now click the 'Manage Display' tab. The top 'File' field stores the actual file/stream info for this asset. There are four display modes, for 'Preview', 'Small', 'Large', and 'Original'. By default, all four modes will display a 'Generic file', which will simply be a link to the original file. You can change these with the selectors. For instance, you might want the 'Preview' mode to display a 'File Style: thumbnail', and the 'Large' mode to display 'File Style: large'. (More on styles in a bit.)
Now we'll add a Media field to our built-in Article content type. Go to the Content types overview page at /admin/structure/types, and click the 'Manage fields' link for the Article type, which brings you to /admin/structure/types/manage/article/fields. Add a new field, called 'Media', by selecting the 'Multimedia asset' field type from the appropriate selector. (Make sure to fill in both the name and label.)
Save the resulting Field settings without changing anything. On the next screen, you'll also see Allowed Media types, which selects 'Image' by default and 'Public files' and 'Private files' URI schemes. Leave these alone for now.
Go to the Media content listing page, by clicking on the very top 'Content' link and clicking on the 'Media' tab (which brings you to /admin/content/media/list). Then click on the 'Upload new files' link and upload an image. (Note there's currently a bug if you have this installed in a subdirectory, leading to a 404. No big deal, just navigate back and hit the edit link of the resulting media file.)
This should bring you to the new media file asset's edit screen, where you can add metadata information, checkboxes, or whatever, based on the Media type fields you entered earlier.
Now add some content to the site, by clicking on the 'Add content' link that is displayed at the top of every page, and clicking next on 'Article', bringing you to /node/add/article. Make up a title, then scroll down to near the bottom, where you'll currently see a textfield with the number 0, a link reading 'Select media', and some 'Debug information'. (That will eventually be made more user friendly.)
For now, click on the 'Select media' link. If all goes well, you'll see a popup browser listing your newly uploaded file from earlier. Click the thumbnail for your image and hit OK; it should now appear on the node form.
Save your node, and you'll see the new media!
Other stuff to play with: go to the File styles configuration page, by clicking on the top Configuration link, and finding File styles in the Media section below. (That's at /admin/config/media/file-styles). You'll see the pre-defined file styles here, which you can edit (don't edit 'square_thumbnail' for now; there's an error on that preset page). Ultimately, you'll actually be able to do some fancy stuff like actually add new presets, save them, add autoplay to YouTube, display images with links to larger files or to the original contextual node, etc. For now, all you can do is flip through the vertical tabs and see the fancy previews. It's just a teaser for now.
Expect much in the coming weeks; the first Alpha is planned for about January 21, 2010!
(Cross-posted at AaronWinborn.com.)