When using ctrl+Xctrl+f command sequence it will display a list of files in the current directory. I spend a minute looking for the right key to move up and down between the different filenames. The correct keys are Ctrl-n and Ctrl-p. You can use almost any other key (like Space) to select and continue typing.
In addition, if you are not already at the file/directory you would like to insert, you can go down a file tree structure as follows:
Optionally enter some part of the directory. You can even use ../../ for example!
Press ctrl+Xctrl+f and select the first item in the tree from the list.
Next press ctrl+f again while the correct item is highlighted to display a list of the next level down the directory tree structure.
You can keep doing this until you find the directory/file you would like to insert in the document.
edit: excuse me, I landed here from a google result for "vim insert file absolute path"
(first leave insert mode with esc or ctrl+c) ;)
from normal mode, on a blank line
!!readlink -f #
this will run a command, and substitute # with the current file name, readlink will resolve a canonical name, and !! will write the output where the cursor was
note, this needs to be done on a blank line, as the content of the line will be fed as stdin to the subcommand.