Hi, I don't use OE so I can't tell you exactly how to sort out what you are doing, but you seem to be going a very long way around just to do an email with pics.
I use Incredimail, very very easy to use and to include attachments and/or pics. Much more fun too. You can also still send emails in plain text if you want, but the picture backgrounds are much nicer.
Free download at click here