Thank's Jeff that was very helpful.

When you are editing a message, click on the Go Advanced button. You will have a more advanced toolbar above the text window. One of those tools looks like a paper clip. Click it, and it will open a dialog window where you can either type in a URL where you picture is located on the internet, or you can click on the browse button to find the image file on your system. Once you have chosen the file, you click in "upload" and there it is... (It's actually easier than it sounds when you type out all the instructions. In summary, click on the paper clip icon from the advanced functions.