When the image appears in Composer you will not see the text wrap around the image, instead you will need to type it following the image, and when it is previewed you will see that it has been wrapped around the image. This is an example to show how it will appear in Composer, and then on the web.

In this example I am aligning the image to the right, which means the text will wrap around the left.
 

How image alignment looks in Netscape Composer.

How image alignment is seen by the viewer on the web.