It would have helped had you mention the need to employ textbox linking, instead of saying that only after I'd spent time providing an alternative solution.

If you insert an image into a textbox, it can only have 'in-line with text' formatting and, if you insert an image into the body of the document and give it a floating format before dragging it over a textbox, the textbox content won't wrap around the picture. Those are the compromises you have to work with; Word provides no way of doing what you want.

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Cheers,
Paul Edstein
[Fmr MS MVP - Word]