Is it possible to attach an image while editing issue?
Can I attach an image to issue from my editor, say, by using markdown syntax e.g. I write the following in my editor
This figure  shows the behavior after fixing #29 .
And ghi uploads the image onto git server and create appropriate link in issue body?
Just to clarify: Where in the GitHub repository would it upload (commit) the image file? Would it go into the root directory of the repo?
Not really. The default server to which browser send the uploaded image is fine e.g. following image is send to cloud.githubusercontent.com/assets/id/hash_of_file.jpeg and a link was inserted in this ticket 

Something similar would be nice.