|You are using XP "and" Win 7?|
Regardless, you should have the 'Outlook' option to allow/block attachments in Outlook. The "upgrade' may have changed your original defaults.
There IS some considerable measure of risk in allowing images from unknown sources, and some, albeit smaller, risk from any kind of image-and-or-attachment even from a known sender. Outlook has "Options...". Check them out (cautiously).