If you paste an image into that field it should be base64 encoded into the HTML field. If that field is referenced by the email template it should pick up the image and include it as an inline base64 image in the email. Are you having trouble with the end user not seeing the images or with getting that into the HTML field in the first place?
Yeh the issue we're having is that if the image shows up via drag and drop and it's emailed internally it works. But if it's sent externally it does not.
So for instance if our system emails to our domain in exchange webmail/outlook(exchange) shows the image just fine. Anyone on lets say, gmail gets a [demo image inserted] but no actual image or attachment.
Ahh yes, that's completely outside the control of ISM and our code. The email is being sent properly as evidences by the image showing in the internal exchange email system properly. I'd venture a guess that the end user's email service may have such inline images blocked or mail security software commonly interferes with inline images.