In Confluence in IE7 do the following:
1. Open a page for editing and select Wiki Markup.
2. Place the insertion point anywhere in the text (not at the end) and click either the Insert Image or Insert link button.
3. Insert an image/a link. The link text is not inserted at the insertion point, instead it is inserted at the end of the text in the edit window.
4. Cut/paste is required to get the link in the correct place.