Why is the media upload button not in the main toolbar & can it be placed there instead?

There is an action 'media_buttons' where these buttons are inserted. Some plugins are using that action to add more buttons, dropdown lists or links. If they had to use the TinyMCE toolbar, they had less room and more restrictions regarding style and JavaScript access.

In short: the current placement is better for plugins.

Moving the default button to the toolbar would probably break some core scripts that depend on that position in the DOM. Maybe you can move it around after onload.

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