See http://www.slipstick.com/mail1/html.htm for various methods. Note that Outlook 2003 and later versions will not show images from external sites by default. Therefore, you probably should embed images, but that will make the messages larger.
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Sue Mosher, Outlook MVP
Author of Configuring Microsoft Outlook 2003
and Microsoft Outlook Programming - Jumpstart for
Administrators, Power Users, and Developers