A strange problem exists with Microsoft Outlook 2003 where embedded images in HTML encoded messages are replaced by a red x (broken image). After searching lots of articles on Google which suggest an issue with a temporary internet folder called OLK20 or OLK40 I was still unsuccessful in fixing the broken image problem. Here’s how I finally fixed it.
[Step 1] I installed Crap Cleaner.
[Step 2] I ran Crap Cleaner with the delete index.dat files option selected in the Internet Explorer section:
[Step 3] I restarted Microsoft Outlook and voila! Problem fixed.