Hi Jaxr,
As I've never needed to use mailmerge to send in-line images, I can't say whether there is a solution, or what it might be. All I can be sure of is the minimum requirements (HTML) and the limitations that can be imposed at the receiver's end. Someone may be able to help you with a solution, though, at:
http://answers.microsoft.com/en-us/o...page=1&tab=all