In order for this to work you need to send an HTML document and then embed the image using mime.
The ASP.NET smtp object does most of the dirty work for you since v2.0.
Here is an example from a microsoft site. original location
//Holds message information.
System.Net.Mail.MailMessage mailMessage = new System.Net.Mail.MailMessage();
//Add basic information.
mailMessage.From = new System.Net.Mail.MailAddress(txtFrom.Text.Trim());
mailMessage.To.Add(txtTo.Text.Trim());
mailMessage.Subject = txtSubject.Text.Trim();
//Create two views, one text, one HTML.
System.Net.Mail.AlternateView plainTextView = System.Net.Mail.AlternateView.CreateAlternateViewFromString(txtBody.Text.Trim(), null, "text/plain");
System.Net.Mail.AlternateView htmlView = System.Net.Mail.AlternateView.CreateAlternateViewFromString(txtBody.Text.Trim() + "<image src=cid:HDIImage>", null, "text/html");
//Add image to HTML version
System.Net.Mail.LinkedResource imageResource = new System.Net.Mail.LinkedResource(fileImage.PostedFile.FileName, "image/jpg");
imageResource.ContentId = "HDIImage";
htmlView.LinkedResources.Add(imageResource);
//Add two views to message.
mailMessage.AlternateViews.Add(plainTextView);
mailMessage.AlternateViews.Add(htmlView);
//Send message
System.Net.Mail.SmtpClient smtpClient = new System.Net.Mail.SmtpClient();
smtpClient.Send(mailMessage);