See the answer here:
embedding image in html email - Stack Overflow
<img src="data:image/jpg;base64,/*base64-data-string here*/" />
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Sub encodeAndSendPicture (pic As String)
Dim Inps As InputStream
Inps = File.OpenInput(File.DirDefaultExternal,pic)
Dim count As Int
Dim buf(99999) As Byte
count = Inps.ReadBytes(buf,0,99999)
If (count = -1) Then ToastMessageShow("Failed to load picture",False)
Inps.Close
Dim B64 As Base64
Dim bufEncoded As String
bufEncoded = B64.EncodeBtoS(buf,0,count)
Dim SMTP1 As SMTP
SMTP1.initialize("smtp.gmail.com",465,"myemail","mypassword","SMTP")
SMTP1.Subject = "test pic"
SMTP1.To.Add("my target email")
SMTP1.UseSSL = True
SMTP1.HtmlBody = True
SMTP1.Body = "<img src=" & QUOTE & "data:image/jpg;base64," & bufEncoded & QUOTE & " />"
Dim os As OutputStream ' keep it in a file for debug
os = File.OpenOutput(File.DirDefaultExternal,"body.txt",False)
os.WriteBytes(SMTP1.Body.GetBytes("UTF8"),0,SMTP1.Body.GetBytes("UTF8").Length)
os.Flush
os.Close
SMTP1.Send