Hmm, it seems a Word update somewhere along the line has broken what was a perfectly good method for unlinking images during a mailmerge. Now all you get with that approach is linked images you can no longer access via any of the usual field methods. All is not lost, though. If you use the shorter version of the field:
{INCLUDEPICTURE {IF TRUE "C:\Users\Elena\Pictures\{MERGEFIELD Picture}"} \d}
you can still unlink the fields immediately after merging (e.g. via Ctrl-A, Ctrl-Shift-F9).

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Cheers,
Paul Edstein
[Fmr MS MVP - Word]