Also I've allowed students to add their own entries but if I log in as a student and try to add a picture there is no browse/upload facility, whereas there is if I'm logged in as a teacher. Am I missing something or is that the way it works
The first problem is likely caused by the glossary filter. Filters slow down your site becuase every page displayed needs to be processed and all the relevant words need to be hyperlinked. That's why the filter has a cache lifetime: during that time pages are not checked for any new links. This speeds up the delivery of that page, but as a side-effect some links may temporarily be unavailable. You can increase/decrease the cache lifetime by visiting the
/admin/filters.php page of your moodle installation. (see screenshot with explanation)
The second problem is caused by Moodle currently missing a student file area. If they upload pictures inside the HTML editor, there needs to some way of managing/controlling all of these uploaded files. Someone is working on adding this functionality to Moodle, but it is not finished yet. That's why the HTML editor doesn't have a upload facility for students using it.
Students can however add one picture as an attachment to a glossary entry which gets displayed inline.