how do I insert a photo into a protected form

If you're using forms protection (required for formfields and possible with content controls also), you can insert Section breaks either side of the area you want to leave unprotected, then exclude that Section from the forms protection - the option to do so becomes available when protecting a multi-Section document. For an example of this, see: http://www.msofficeforums.com/word/10883-making-template.html#post28556

That said, it's also not possible to edit images in a document using forms protection. What you can do, however, insert the image into a separate (unprotected) document, do your editing there, then cut & paste the image into your 'form' document. Alternatively, you can use a separate (unprotected) document that's linked to your form via an INCLUDETEXT field as a holder for the drawing object and picture. Your users will be able to freely edit that document and, if you check the 'update automatic links at open' option under Word Options|Advanced > General, any changes to the 'picture' document should automatically be reflected in the form document.

What type of form is it? 

If you use a Picture Content Control, the user can simply click on it and then a dialog will open to allow them to select a picture.

If your form uses Legacy FormFields, you would need to have a macro in the form and the problem with that is that unless the user has the macro security set to allow macros to run, the code will not work.