When you view a photo in the iPhone app, in the share sheet (tap the share button) there is a copy option (iOS 6 only), that will copy an HTML link to the photo which you can later paste when replying to a discussion.

I have the iPhone 4 so it's not there. :-( I thought I missed something but all it offers is share on FB, twitter or email. I emailed it to myself hoping there would be a HTML I could copy/paste but there wasn't.

What about adding pictures (from Houzz or other location) on a laptop? I found only the same two options (my photos and library only). Is there a link to the pics from my own ideabook or from the general photos on Houzz? I have seen several links from other discussions that seem to follow the same format like it was an option from somewhere.

If you copy paste the link in the email to the discussion it will be detected that it is a link to a houzz image and will be displayed as such. So to include a houzz image in your discussion answer you just need to paste the link to the photo in houzz.com.

Incidentally, you can upgrade your iPhone 4 to iOS 6, if you are currently on iOS 5 its even very easy, just go in your setting ap to general->software update. If you are on iOS 4 you need to connect your iPhone to your computer, and iTunes will do the rest.