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not always a great idea to use HTML in email - a lot of clients still don't read it. just comes out looking crappy. plus, the photo you use may not load in-line on other people's machines, leaving them with nothing but a "download attachment" option. but if you must, just use standard html code around the photo...

pnw
 
A lot of servers are stripping the html code or blocking emails with it all together. Why, virus and hacking fears as well as bandwidth, usage and legal issues. The organization I work for does not allow emails with HTML because it was possible to send somebody a pornographic image, resize it to show up as single pixel, and (under our IS policy) that image could be then used as grounds to terminate an employee.
 
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