Any Gmail user will likely tell you "my kingdom for the ability to insert images directly into e-mail messages!" If you are some sort of royalty, you'll be happy to know that you no longer need to leverage your castle and the surrounding villas for this rather inequitable bargain; Google has finally added the long-awaited feature to Gmail for you.
As with most new Gmail abilities, you need to turn it on in the Labs; click Settings at the top of your Gmail window, click Labs, and scroll down to Inserting Images. Enable it and click Save Changes.
The next time you compose a message, you'll see an image icon in the toolbar. You can upload an image from your hard drive or enter a URL, and then specify the size of the embedded image in the image.