Some of you who have experienced the problem with images will have tried the suggested fix. It seems to work for some people but note that there are also reports that for others it makes the situation worse (I suggest you read through the nearly 80 posts to this 'Hot Topic' thread to see what I mean). If you've not tried the fix I'd suggest you sit tight as I'm doing - just in case!
It's now Day 5 of this problem and Blogger are STILL working on it.
Yesterday 'Blogger employee' reported to the Blogger Help (Google) Group that
Thanks for keeping us posted on what you're experiencing. We're still working on the fix, but we should be releasing it shortly. At that point, all future images you upload should enlarge as before. To fix the currently affected images, you will likely have to manually fix them. I know this is somewhat tedious, so apologies in advance.