I'm sorry. Your screenshot does not tell me what the problem is.
This has nothing to do with using the template as a pseudo normal template.
There is no such thing as a normal paragraph but there is a normal paragraph style. This also has nothing to do with how pasted images are presented.

A suggestion. Rename your normal template to mynormal.dotm. Then reopen Word. Try pasting the image into the blank file (which will be based on the default normal template).

What happens?

Inline with text only does so much because an image takes up however much room it takes.

You might try attaching the image you are trying to paste to your reply as well as the screenshot of the paste result. Even better, attach an actual document with the image inserted.

The way to attach files is to click on the Go Advanced button in the forum and then click on the paperclip button.