Worth trying! Nice suggestion Lona....
I don't think its an outlook setting, cause it wouldn't just leave a "broken picture" image, its technically replacing the real image with that "broken picture" image.... so whats the point! It would do something else instead like remove the pic entirely and tell you why....
this is just strange, so I would check Lona's suggestion...
but also update virus and look for spyware! Your Outlook might have a hijacked registry key or something that is interfering with embedded pics....
this sounds particularly possible since you have seen the pics twice in your tests - perhaps some BAD software wasn't running at that point (for some reason), but has been running and blocking all the other times....
GL