Picasa web albums cannot always be linked to directly like that. If you're using an image off of Blogspot - as that usually is - you have to use their format as found on the post HTML, thus:

<a href="http://bp1.blogger.com/_s3pKTUzV-CM/R8i1TptlJAI/AAAAAAAAACE/I7vjmGZiUu0/s1600-h/NewPicture147.jpg"><img style="cursor:pointer; cursor:hand;" src="http://bp1.blogger.com/_s3pKTUzV-CM/R8i1TptlJAI/AAAAAAAAACE/I7vjmGZiUu0/s400/NewPicture147.jpg" border="1" alt=""id="BLOGGER_PHOTO_ID_5172583521254188034" /></a>

and that will come up as a conveniently thumbnailed image.