Yes yes, it can be done.
1. On the menus on the right when viewing your photo, look for "Link to this photo", click on it to expend the menu.
2. Select the size you want to embed, eg. 400px.
3. Copy the HTML code under "HTML to embed in website". It should look something like this:
<a href="http://picasaweb.google.com/genghk/RandomStuff/photo?authkey=blDdICSftxU#50949011611218XXXXX"><img src="http://lh5.google.com/genghk/RrS5nLJkLjI/AAAAAAAACEM/l5dSG8cdVO4/s400/IMG_XXXX.JPG" /></a>
However, all you need is the second string of "http://lh5.google.com/yadayadayada...". What I do is copy the whole chunck from Picasa first, then paste it into CS's "Insert image" dialogue box, then trim it down to just what's between the second set of quotation marks. That should do the trick for you.
Btw, like your CBD night shot, that must be done from top floor of city hall!