I have the same problem in hotmail. It seems to have started after hotmail upgraded itself 17th june 2011. I have checked different browesers the same problem occurs, must be hotmail issue.
When forwarding/replying the embedded pic is not available as an attachment (it used to be) which seems to cause it to not forward pictures already in an e-mail (not as attachments) the pictures in the forwarded e-mail are blank box with x and recipients do not get the pictures. When I look at my sent messages they are also missing the picture.
Any ideas what the problem is? Can't find any references to this at Microsoft or anywhere else but here. HELP