As far as Embedding images go, the email has to be setup as an HTML email and, as far as i know, you can only use Absolute URLs to the images you wish to place in the body of the email.
In 2.0 you have the ability to use a LinkedResource and physically embed an image into a Mail object.
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I will only tell you how to do it, not do it for you.
Unless, of course, you want to hire me to do work for you.
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Read this if you want to know how to get a correct reply for your question:
http://www.catb.org/~esr/faqs/smart-questions.html
^^Took that from planoie's profile^^
^^Modified text taken from gbianchi profile^^
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