CKfinder works properly with ImageButton but not Image

I have a really strange issue I do not understand and can't figure out. In the text area I am creating I am using a simple toolbar with limited functions. In that toolbar I want users to be able to insert images.

The problem I am having is that if I use the 'ImageButton' option and browse server for the image (CKfinder) it finds the image and works OK. If however I use the 'Image' option in the toolbar and then click browse server it doesn't find anything including the directory where the images are stored.

To add a bit of complication I have the images stored in a directory structure:
/users/$username_variable/large
/users/$username_variable/image

Is this an issue with the way I am configuring CKfinder or something else?

Any help will be really appreciated.

I originally posted this in the CKEditor 3.x forum but realise it was probably more appropriate here.