Sorry to be a pain but I have unticked the box 'send pics with message' but they are still embodied in the email as well??? I have tried restarting but they are still in there.
At a guess, because you are clicking the "Insert picture" button which will insert it into the HTML body.
You need to click the "Attach file" button, which will send it as an attachment.
Sorry, I take it all back - it seems that MS really couldn't give a stuff about what you want to achieve - they just do things in their own sweet way, regardless of your settings :-)
I am clicking on the attach file button (paper clip) Rojash and it doesn't include the photo in the email body there and then but when I receive the email it is there again.