Just a hypothesis that has a very very good chance of being wrong, but i think windows live mail has issues with linked images. Embedded and attached images should work fine, however microsoft chose to view linked images as threatening.
Try this maybe?
In the options/safety options dialogue, on the Security tab,
Deselect "Do not allow attachments that could potentially be a virus to be saved or opened"
Deselect "Block images and other external content in HTML email"
In the program options dialogue (Ctrl-Shift-O), on the Read tab,
make sure "Read all messages in plain text" is deselected
restart the program and try viewing the email again, I have my fingers crossed