I found this in another thread and it seems to have fixed my problem.
There is a registry key HKEY_CURRENT_USER\Software\Microsoft\Office\11.0\Outlook\Security. It contains a key called "OutlookSecureTempFolder ". When I deleted that key, all images began to show.
Just in case someone else has that same problem. Of course you should back up the registry before making changes...
There also was the following note:
"I have had the key recreate itself periodically, although I'm not sure why. You can probably create a regedit file to delete that key and use it as a batch file to dix it again as needed.