First off, I highly recommend changing to JCE for an editor. Much better image handling.
Your problem MIGHT be in your joomla config. Check your configuration.php in your root directory.
find the line that says$mosConfig_live_site = 'http://yoursite.com';
(around line 44)
add the www. in front of yoursite.com so it looks like
www.yoursite.com
.
I had the same problem and that fixed it.
Also, maybe a dumb question because the pop up is actually popping up but maybe check your popup blocker settings.