It would probably be simpler to use the Word message editor e.g as follows. Incidentally using this method, if the image is part of your signature, there would be no need to add it in code.

Sub MyReply()
Dim olMsg As MailItem
Dim olReply As MailItem
Dim olTemp As MailItem
Dim olInsp As Inspector
Dim wdDoc As Object, wdDoc2 As Object
Dim oRng As Object, oMsgRng As Object
Dim oBookmark As Object

Dim strTo As String
Dim strSubject As String

    On Error GoTo err_Handler
    Set olMsg = ActiveExplorer.Selection.Item(1)
    With olMsg
        Set olInsp = .GetInspector
        Set wdDoc = olInsp.WordEditor
        Set oMsgRng = wdDoc.Range
    End With
    Set olTemp = olMsg.Reply
    strTo = olTemp.Recipients(1).Address
    strSubject = "[I] " & olTemp.Subject

    Set olReply = CreateItem(olMailItem)
    With olReply
        .BodyFormat = olFormatHTML
        .Display
        .To = strTo
        .Subject = strSubject
        Set olInsp = .GetInspector
        Set wdDoc2 = olInsp.WordEditor
        Set oRng = wdDoc2.Range
        oRng.collapse 0
        oRng.formattedtext = oMsgRng.formattedtext
        Set oBookmark = wdDoc2.Bookmarks("_MailAutoSig")
        Set oRng = oBookmark.Range
        oRng.collapse 0
        oRng.InlineShapes.AddPicture FileName:= _
                                     "W:\ABC\0 Archiwum\picture1.jpg"

        Set oRng = wdDoc2.Range
        oRng.collapse 1
        oRng.Select
    End With
    olTemp.Close olDiscard
lbl_Exit:
    Set olTemp = Nothing
    Set olMsg = Nothing
    Set olReply = Nothing
    Set wdDoc = Nothing
    Set wdDoc2 = Nothing
    Set oRng = Nothing
    Set oMsgRng = Nothing
    Exit Sub
err_Handler:
    Err.Clear
    GoTo lbl_Exit
End Sub