Sounds like you have your message format set to Plain Text which (by
definition) cannot contain any formatting and embedded objects.
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Robert Sparnaaij [MVP-Outlook]
Coauthor, Configuring Microsoft Outlook 2003
http://www.howto-outlook.com/
Outlook FAQ, HowTo, Downloads, Add-Ins and more
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"(E-Mail Removed)" <(E-Mail Removed)> wrote in
message news:3D90FDA4-2862-41D3-966E-(E-Mail Removed)...
> Outlook 2007. When I want to have a picture embedded inside a new email
> message. After establishing my cursor in the body of the new email
> message
> and selecting INSERT, the picture icon in the illustrations box is grayed
> out. I have more than one PC and this is the only PC where the icons are
> grayed out. What setting controls this functionality.