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Outlook 2003 copy image from email paste into new email, image place holder only appears

I have Office 2003 installed on a Windows 2008 R2 server running as a XenApp 6.5 application server.

When copying an image from an email in Outlook 2003 and pasting it into a new email, the image doesn't appear. The only thing that is seen is a place holder (a white box) that is the size of the image that was copied.  

Observations:

If you have copied an image from an email in the reading pane, it can be pasted normally outside of Microsoft office applications.
If the image is copied from an email displayed in the reading pane and pasted in Word, Power Point, etc, again, only the place holder appears.
If the email that the image came from is opened for editing - say you hit the forward or reply button, if you copy the image, the image then pastes normally in a new email.
Images can be copied from other programs on the server and pasted normally in emails.

Well, I've looked all over the webs for the answer and I've not found a single solution. Any and all suggestions are welcome!

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phlyphishr
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Sounds silly but... make sure your message is set for HTML and not TEXT only.
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ASKER

Outlook is set to HTML as the default. Note also that if Outlook is set to use its native editor instead of Word, the images can be copied and pasted normally.
Setting Outlook and Word to run in compatibility mode as Windows XP SP3 causes Outlook to stop working and doesn't resolve the issue.
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HelpDeskGeiger
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This appears to be an on-going issue with Outlook 2003 using Word as he default editor. User's can use Outlook's email editor if they want to copy and paste images between emails.