From M$ Office online Outlook Help
"If Microsoft Word is your e-mail editor, see Word Help.
Do one of the following depending on the type of message you're working with:
With the message open, on the Insert menu, click Picture.
In the Picture source box, type the path to an image on your hard disk, type the URL of an image on the Internet, or click Browse to locate an image.
Set any other options you want.
RTF message or other Microsoft Outlook item
The following procedures apply to a variety of objects including pictures. Use a linked object (linked object: An object that is created in a source file and inserted into a destination file, while maintaining a connection between the two files. The linked object in the destination file can be updated when the source file is updated.) or an embedded object (embedded object: Information (object) contained in a source file and inserted into a destination file. Once embedded, the object becomes part of the destination file. Changes you make to the embedded object are reflected in the destination file.) to add all or part of a file created in a Microsoft Office program, or in any program that supports linked and embedded objects, to an item.
Create a new embedded object
Click in the item where you want to place the embedded object.
On the Insert menu, click Object.
Click Create new.
In the Object type box, click the type of object you want to create.
To display the embedded object as an icon, select the Display as icon check box.
Note Only installed programs that support linked and embedded objects appear in the Object type box.
Create a linked object or embedded object from part of an existing file
Open the item that contains the information you want to create a linked object or embedded object from, and then select the information.
On the Standard toolbar (toolbar: A bar with buttons and options that you use to carry out commands. To display a toolbar, click Customize on the Tools menu, and then click the Toolbars tab.), click Copy or Cut .
Switch to the item where you want to place the information, and then click where you want the information to appear.
On the Edit menu, click Paste Special.
Do one of the following:
If you want to create a linked object, click Paste Link.
If you want to create an embedded object, click Paste. In the As box, click the entry with the file format you want to use.
Create a linked object or embedded object from an entire existing file
Click in the item where you want to place the linked object or embedded object.
On the Insert menu, click Object.
Click Create from file.
In the File box, type the name of the file you want to create a linked object or embedded object from, or click Browse to select from a list.
To create a linked object, select the Link check box.
An embedded object is created if you don't select the Link check box.
To display the linked object or embedded object as an icon— for example, if others are going to view the file online— select the Display as icon check box.
If you want to send an object in an e-mail message, meeting or task request, and you want the recipients to be able to edit it, you need to store the source file on a server.
If you create a linked object from a Microsoft Office file, and you want others to be able to edit the linked or embedded object, the source file must be saved on a network server, the recipients of the message must have access to the network share the file is stored on, your network must support UNC (universal naming convention (UNC): A naming convention for files that provides a machine-independent means of locating the file. Rather than specifying a drive letter and path, a UNC name uses the syntax \\server\share\path\filename.) addresses (address: The path to an object, document, file, page, or other destination. An address can be a URL (Web address) or a UNC path (network address), and can include a specific location within a file, such as a Word bookmark or an Excel cell range.), and you must type the UNC address for the network share that has the file in the File box. For example, in a message, click in the text box, then on the Insert menu, click Object. Then click Create from file, and in the File box, type the path for the file, such as \\Data\Spreadsheets\File.xls."