Hm, are you talking about http://en.support.wordpress.com/images/image-settings/#drag-size ? If so, you are correct and it appears that the option to drag image corners to resize does not exist any longer.
However, when you click on the image in the Editor, you should see two buttons. Click on the Edit Image button and you can resize the image by percentage. Click on the Advanced tab and you should be able to enter pixel dimensions.
Adding to the confusion, resizing an image inserted by URL also seems to be theme dependent. In my test blog using Misty Look, the "resized" image showed in the preview, but not in the actual post. Switching to Coraline, the image correctly resized in the post.