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My 2.0 cents..
I think it’s not a good idea to embed images in emails for the simple reason that it reduces the chances of your email getting through, which is the whole point of doing an email in the first place.
The alternative, as you say, is to host the image externally i.e. use the IMG tag to point to the image on your server. That should increase the amount of emails getting through..i.e. you’re not sending images as an attachment (which triggers some of the more robust spam checkers that will tag your email as ‘suspect’ if not ‘spam’ straight away, purely because there’s an attachment)
But the overriding reason, for me, is that a huge amount of people (in Europe and Asia..I’m not sure about the USA) catch their email on the move, whether it’s a blackberry or one of the more recent handsets and intricate HTML emails with images is an irritant (they take longer to receive..and on some mobile networks that charge for data transfer, cost more to receive)
So, very short, very brief, text-only emails are the way to go, IMHO with a link across to the ‘latest newsletter’ or whatever.
Some people do prefer to get the full newsletter in their email, including graphics etc. etc. so if it’s a new site you’re working with, I’d recommend you include a HTML/TEXT ONLY/RICH TEXT option in your ‘Sign up for our newsletter’ form….so you can deliver what the person chooses to receive. (Rich text is easier to read than plain text – you can include bold/italics/unordered and ordered lists etc….simple html basically.)
On this subject and slightly related….can I also mention that I’ve noticed that sending bulk email newsletters from a website is also problematic. I’ve started using a desktop tool called gammedyne mailer recently ( http://www.gammadyne.com/mmail.htm ) that allows you to send mixed emails (Both HTML/TEXT in the same email) from your desktop. I’m not sure why it’s more efficient than sending from a website, but, I’m guessing that it has something to do with how the email header is constructed. i.e. When you’re sending email from your desktop, the email header is different to what’s generated by a website. If you’re using something like Drupal or Joomla (PHP/MYSQL site frameworks) for data capture, you can point gammedyne to your database to populate the recipients.
Not sure if that helps…but..that’s just my 2.0 cents.