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When you open an e-mail message in Microsoft Outlook Express on a computer that is running Microsoft Windows XP Service Pack 2 (SP2), the areas in the e-mail message that are supposed to contain images are blocked. These areas display a red X placeholder. Additionally, you are prompted with the following message just above the content window of the e-mail message:
Some pictures have been blocked to help prevent the sender from identifying your computer. Click here to download pictures.
This behavior occurs because of the new Block images and other external content in HTML e-mail security option. By default, this option is turned on in Outlook Express after you install Windows XP SP2.
This option helps you avoid viewing potentially offensive material, enables you to decide which images that you want to download, and helps reduce the junk e-mail messages that you receive. We recommend that you leave this option turn on and that you download images for trusted messages only. To do this, click the Infobar to download the images for each message. The Infobar is the banner that is near the top of a trusted e-mail message.
To work around this behavior, turn off the Block images and other external content in HTML e-mail option.
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How to enable Internet images in Outlook Express
To manually work around this behavior, turn off the Block images and other external content in HTML e-mail option. To do this, follow these steps.
Warning The Block images and other external content in HTML e-mail option is a security feature that has been included in Windows XP SP2 to protect your computer against junk e-mail (spam). We recommend that you do not turn off this option.
1. Click Start, point to Programs, and then click Outlook Express.
2. On the Tools menu, click Options, and then click the Security tab.
3. Click to clear the Block images and other external content in HTML e-mail check box.
Reference - http://support.microsoft.com/kb/843018