See https://www.gmayor.com/mail_merge_graphics.htm and https://www.gmayor.com/mail_merge_graphics_addin.htm with regard to the correct syntax for merging images.
You may find https://www.gmayor.com/email_merge_addin.html or https://www.gmayor.com/MergeAndSplit.htm useful. Both of these, when used with the correct syntax for graphics, will update the fields on the fly.
Ensure the document and its data and the images you are merging are stored on the local hard drive.