Outlook won't attach jpeg's

A few weeks ago I formatted my hard drive and reinstalled Office2002, including 
Outlook. Now when I click the paperclip to attach a jpg, it acts like the jpg 
is attached. Although an icon appears in the body of the email that resembles a 
jpeg, when I send the email there is no jpeg attached.  It looks like I've 
attached the file but the sender doesn't receive it.  Before when I would 
attach a jpeg it would show up on a separate line under the subject after it 
was attached but now it is inserted where ever the insertion point is when I 
try to attach.

I'm sure there's just a setting I need to change but I'm not sure what. TIA.