Can't see images in mails I compose

When I attach an image in a mail, I can throw it anywhere, inline, but it shows up as an image icon rather than actually showing the image:

Any way I can fix this? It also doesn't allow me to make a signature with images.

To make a signature with images go to Preferences under the Mail menu and click on signatures. You should get a panel that looks like the image below. In the area on the right, right-click and select Import Image. You can select the image you want in your signature.

You can also open an image you want to display. Select all and copy the image. You can then go to the panel shown below and paste into the area on the right.

To solve your problem about images not appearing you can try, instead of loading image into your message, the same method as above. Open the image and copy it, then paste it into your email.