Once you have added the picture, you click in the message box where you want to picture to show and then click on Insert (which is next to the file name in the section below the message)
Note that pictures that are large, eg greater than 1000 pixels or sized above 450K are not permitted. First you will need to make them smaller. There is software available to do this id this is an issue.
Tried this, but all it does is insert a line, saying "Attachment..." with the name of the pic. The one I'm trying to insert in the text body is 21.5KB and 387X240 pixels.
Is that a problem?