I was curious what happened when I used the new Community Server MetaBlogAPI with inline images when posting from Live Writer. Specifically, I wanted to see how and where new folders were created and how image file names were handled.
Two things. For one, this test was done on my dev server because, two, I'm way too much of a control freak with my site to use the MetaBlogAPI for inline images. My blog images are in a folder structure I've been using since 2003 and arranged by year. I'm not going to change that. I ftp the images to be displayed in my blog posts when I write the post and link to them either online or in Live Writer. Of course, one of the beauties of Community Server, same with the new MetaBlogAPI, is that we can modify the source to control every single bit of the transmitted inline image if we want, as several guys have already demonstrated in the week since the new MetaBlogAPI has been released. 
Okay, nothing here you haven't already seen. The image is a screenshot of Community Server Roles for a forum at cs.org. Yeah, I know. I need to vary my nerd diet a bit. No! I won't do it. I won't! I won't! Oh, sorry...
The inline image process is interesting because rather than link to a web image as I normally do, I add the image from a local hard drive and let the MetaBlogAPI take care of the rest. Something else interesting is that Live Writer supports linking to a larger image (set in the sidebar Image Properties), so I scaled the image for display in the post. Then on posting with the MetaBlogAPI with Live Writer, not only did the image transfer to my site, but it was hyperlinked to the actual sized image as well. Two images are created by the MetaBlogAPI to support this function.
Okay, so now for the all-important question for anal admins: where are the folders created and how are the filenames changed? As we see below, they are created under in a WindowsLiveWriter folder under blogs/OurAppKey. A separate folder is created for each post.
The filenames are only changed to accommodate the Live Writer function of linking to a larger image. If the image is uploaded without any additional linking, its original filename is retained by the MetaBlogAPI. Sweet.
The MetaBlogAPI is a splendid technology. And no one does it better than...well, you know the rest.