For everything to work properly you have to:
1.) Go Tools -> File manager -> File Manager Path = /home/hsarvell/www/trakajak/assets/ in my case.
2.) Go Interface & Features -> File base path: = /home/hsarvell/www/trakajak/assets/
3.) Go Interface & Features -> File Browser Url = http://trakajak.com/assets/
Switch paths as necessary to reflect your own setup but note that you do NOT set for instance /assets/images. So now even my challenged father can add pictures by simply left clicking an article and choosing Edit Document -> Clicking the image icon in TinyMCE -> Clicking the Browse image in the Image URL field in the insert/edit image form -> simply clicking the image he wants in the FCKeditor Resource Browser and then -> insert, voila! Done.
Lycka till med dina träkajaker!