Help with resizing an image in complete mode

I was hoping to create a faithful remake of N64 Moo Moo Farm. I've already made an N64 Luigi Raceway remake, but the image was quite large and it takes a while to play, so I wanted to improve on that for Moo Moo Farm. However, I can't figure out how to resize the image. I've done some research and found it should be in the options tab, but my interface looks like this:

Any help in finding the problem is much appreciated. I realize it could be to do with my pasting an image link rather than uploading an image, but I can't get that to work, either:

you can't change size when you use paste image url

Okay, that confirms some of my suspicions. However, there's still a problem:
How can I fix this error to upload files directly? Again, help would be appreciated.