This happened to me the other day and I had a heck of time finding the solution. Here's is what happened...
I used my right-click to sendto
Mail Recipient. I was prompted to send it Photo Mail. I didn't want to see that message anymore and promptly clicked NO. Problem is I moved too fast and chose Photo Mail. From there on, any image I wanted to attach to an new email, no matter how, it would appear embedded in the email.
Finally the solution: It's not easy to find and it should be a part of the Properties and Settings in Widnows Live Mail but it's not. You have to go into the registry to fix this. Here is how.
HKEY_CURRENT_USER\Software\Microsoft\Windows Live Mail\mail
On the right side look for Publish Photos.
The DWORD value is 0 (zero) by default but you will find it to be the number "1". Simply change the number 1 to 0 and you're back in buiness.
I know this must have happened to someone as well, maybe in different manner.