--- insert.module
+++ insert.module
@@ -369,13 +369,21 @@ function theme_insert_field_widget_settings_styles($variables) {
  * setting.
  */
 function insert_create_url($uri) {
-  // This variable has no configuration location. It may be set by placing
-  // $conf['insert_absolute_paths'] = FALSE;
-  // in the site settings.php file, or by manually running variable_set().
-  // For reasons why this might not do what you want and why there's no UI
-  // see http://drupal.org/node/640352.
-  $absolute = variable_get('insert_absolute_paths', TRUE);
-
+  $url = parse_url($uri);
+  if ($url['scheme'] == 'public') {
+    // This variable has no configuration location. It may be set by placing
+    // $conf['insert_absolute_paths'] = FALSE;
+    // in the site settings.php file, or by manually running variable_set().
+    // For reasons why this might not do what you want and why there's no UI
+    // see http://drupal.org/node/640352.
+    $absolute = variable_get('insert_absolute_paths', TRUE);
+    if (!$absolute) {
+      $uri = file_create_url($uri);
+      $url = parse_url($uri);
+      return $url['path'];
+    }
+  }
+  
   // TODO: Rewrite this function to support relative paths? Tricky because
   // not all stream wrappers support local paths at all.
   return file_create_url($uri);