I built this functionality into a few apps that never made it past proof of concept, but a good library to get your feet wet with is dropzone: http://www.dropzonejs.com/

Yes, but do you still get the same options you have on add media (title, alt, caption etc)?

I haven't had a chance to try it yet.

It gives you all of the same options, as well as the ability to select a different images before inserting.