in-line photo won't resize and covers some lines of text

When I import (drag) a raster image (photo) into the text of a document in the main editor panel, the double clicking the image doesn’t reveal the scaling controls.

In addition, the image overlays some of the text (mainly at the top of the image where several lines of the text are hidden behind the image. The text cursor blinks within the image where the hidden text is.

Sounds to me like the line that the image is on is set to use a fixed height instead of allowing the content of the line to determine its height. Put the cursor on the line with the image and use the Format ▸ Paragraph ▸ Line and Paragraph Spacing… menu command to examine the line’s settings. Optimum settings for an image line are “1.0” for the Line-height multiple, “0.0” for all other line height settings, and the paragraph spacing amounts are arbitrary.