Hi Roaster,
The Outlook embedded image noncopying is a universal issue for all IE7 users. Please try to copy the email message (Ctrl+A, Ctrl+C) to Microsoft Word 2003. You'll see the image(s) will be missing too. This alone should prove it's not an issue of UR. As mentioned previously, you must uninstall IE7 entirely. In my case, I can't because some mission critical apps such as MindManager require IE7.
Armstrong
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