This is a legacy form element http://cvs.moodle.org/moodle/lib/form/htmleditor.php?view=log and it hoped that all of these will be replaced in core and modules designed for Moodle 2.0.
From a programming point of view we don't have any explicitly defined filearea. We could fall back to using the course filearea but that just causes upgrade problems later.
So from a user point of view, when this element is used they should NOT see any filepickers within the editor interface (they can of course still manually paste in URLs and so on).
Mat can you make sure this works?