Yeah it worked great. For reference in case others want to do this, here is everything I did to make this work on VB 4.2.2 in the ckeditor.
1. Install the image software as described in http://www.vbulletin.org/forum/showthread.php?t=307803. I got the 1.6.5 download and it was working fine for me. All set up and good to go.
2. I followed the guide to add a button here: http://www.vbulletin.org/forum/showthread.php?t=278828, as was already pointed out.
3. And the thing that made it all work for me:
editor.insertHtml( 'Hello World! - Hello World!' );
Aside from renaming all the 'celButtonDemo' into something else, that is all I can recall changing from his provided code. Didn't have much luck with changing where the button appeared. Replacing "Quote" with "Image" broke things for me.
window.open('http://IMAGEHOST/BASE-URL-HERE/index.php?mode=vbull&tpl=.&forumurl=' + escape(document.location.href), '_imagehost', 'resizable=yes,width=860,height=625');
I won't say the the setup is perfect, but it works. For example, by button is off center. Would love to know how to fix that.