When I've wanted to include an image in a Gmail message, I've always added it as an attachment. I didn't realize that under Settings, on the "Labs" tab, you can enable the "Inserting Images" feature, and use it to insert images directly into the body of your email messages.
I wonder why this feature isn't enable by default -- it's a standard feature at this blog-hosting site, for example.
In any case, I finally found it, so I'm happy.
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