I have spent a couple of days chatting with tech support on this through the Outlook app and it sounds like they have no idea what's causing this nor do they sound like they have a solution.. i was given the generic runaround (clear cache, uninstall and reinstall app etc) and it got nowhere.. they told me they where closing the ticket and would notify me if they found a solution..
It's pretty sad considering this is obviously not an isolated issue..
I suggested they open one of these emails in HTML and look at the actual code, i suspect the image itself gets left behind somehow.. the image source address is most likely missing or the brackets are not formatted correctly (hence why you get the red x or the image icon where the image should be)
I also pointed out that this started after an update around the end of September beginning of October last year, prior to the update you where able to either attach the image or embed it in the body.. when you attached it, it uploads the image as an attachment this leaving less chance that the image gets left behind when you hit send.. when the image is embedded when you hit send and the image source address hasn't formated yet (for what ever reason) you get the body of text with the red x or image icon where image should be so this is where i think the problem stems from
I don't know the accrual process of where the image uploads or how the address for the image source gets created but logic points to this as being part of the problem given the end result...