Double Click in New Google Sites
Google Sites has had a major update. You possibly do not have access yet to the new Sites (sites.google.com/new) unless your Apps administrator signed up for the preview. Be patient, it will roll out to everyone eventually (If you want to know when it comes out, follow @jrochelle).
When designing pages in Google Sites you do not have to use the toolbar on the right-hand side. Double clicking on the page brings up this attractive wheel with the option to insert a text box, upload a file, embed a URL, or insert an image.