Hi Mike -
I didn't delete the old image, I used the "change picture" feature that you get if you highlight image and right click in Word. I assumed since it says change, that it gets rid of the old one. I did find that it was back to it's old self soon after I wrote you as in CPU usage. It seems the longer I have it up and working with it, the more it starts slowing down. Maybe cacheing temp files?!? I don't know, but I'm just dealing with what I got now. It's for the most part done unless I do changes down the road.
I see that there is not way to get to the html from Word like you said. So I did bring it up in Dreamweaver. At first, Dreamweaver was doing what I wanted as I could set the path to the correct image. But when copied into that Editor, it loses a lot of info. When I finally did bring up in Dreamweaver, I noticed that I have about 160 .gifs and 160 .pngs tied into the code so it looks like it doesn't delete and replace with the png. That's probably why it went larger. Stupid Word! I deleted that .gif in that file it makes so it doesn't use both now. But code probably still there.
You suggested to used Dreamweaver or Frontpage. I do use Dreamweaver all the time. I have a bunch of websites. However, this site is all smarty templates where you use this editor. So, I just spent more hours getting no where, when it only took about 8 minutes to just change the path individually in the editor. I can't copy that folder either because once the code in the editor, it's still directed to my local computer name. I would have to change that path as well individually.
I'm done! I so sick of the problems and time I'm taking trying to perfect it in Word and Dreamweaver. But think Word should have that feature in there. It's just easier to change image with the editor tool individually. Like I said took, only about 8 minutes compared to hours and headaches.
I checked out your website real quick. Good Stuff! I also visited a couple of your sponsors in appreciation of your help

You specialize in Outlook by chance?