Inserting An Image Using Inline Attachments
Embedding inline attachments in the body of an email is a simple process and should be familiar to anyone experienced with HTML.
First, an attachment needs to be added from the message setup window.

After an image is opened, a dialog will pop up asking if the attachment should be inline. Click yes or press y.

Following this, a prompt will ask for a Content ID.

Once a Content ID is specified and the OK button is pressed, the attachment should show up in the list in the form of Path & Filename | Content ID

Finally, the image is placed in the body using the IMG HTML tag.
Note: HTML in Email Body must be enabled

The results can be seen in the body preview.
