Steph, pictures embedded in HTML emails will or should view with BB Smart.
It is chancy though on doing as you are trying, sometimes they will, sometimes not. You have to understand that RIM strips HTML emails of most coding, leaving mostly the links (in most cases). What BBSmart and Empower HTML email viewers do is to attempt to recreate that HTML email for you. It is not always 100%, since BBSmart gets the email after RIM has stripped it.
That's the short of it, I am sure there is more to the expanation, but that is the way I understand it.
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