<font color=navy>Um, I just hit copy & paste, and that works for me.
Like Bob said, when you're in the Inbox, go to Tools and Options. Click on Mail format, and choose HTML. Once you've done that you can either paste an image in your email (if it's supported like .jpg or .gif) or you can insert a picture from your computer. You do that by going up to Insert, then choose picture... from file. You can browse through your folders for the appropriate photo (I use animated gifs, and they work fine).
To create a signature with a gif, go to Tools, Options, Mail Format, and then choose the button for signature picker. You can create a signature with pictures. I have different ones I use.
Let us know if you need more help.