Prevent Outlook 2010 Insert Picture resizing image
When you use the Insert / Picture feature to insert an inline image, Outlook (and other MS apps such as Word and Excel) will look at the DPI setting in the image file. If your picture has a DPI setting of anything other than 96, Outlook will resize (i.e., scale and resample) your image (permanently) to 96 DPI upon insertion and there isn't much you can do about it after the fact.
The way to avoid this problem altogether is to open the image in a good image editor, set the DPI value to 96 DPI, and then save the image. If you do not resample the image when you do this, a good image editor will in no way affect the actual image content (i.e., it will remain pixel for pixel identical). After you do this, when you insert the image into an Outlook e-mail, Outlook will show it (and send it) in its original size, unless you manually resize / scale it. This is how you avoid the gratuitous "Outlook scaling, blurring, and destroying your pristine image," issue.
Searching for ways to resolve this problem took me quite a bit of time and effort. I would like to thank the following informative web site for describing both the origin of this problem and its solution:
Image resizes and becomes unsharp upon sending.
Update: The 96 dpi mentioned in my answer above is not fixed. In Windows, you can choose to set the DPI value to other settings using for example, Control Panel > All Control Panel Items > Display in Windows 7. This change affects the DPI value that MS Office products use.
If your text size is set to something other than "Smaller" (i.e., 100% / 96 DPI), you will have to use a DPI setting other than 96 DPI, depending on the text scaling factor you have set. This is especially true on laptops where people tend to use larger text settings, because their screens are much smaller (often set this way right out of the factory). For example, if you are using Medium size text (i.e., 125% of the 96 DPI value), your images will have to have their DPI setting changed to 120 in order not to get rescaled/resampled when inserted into Outlook.
The moral of the story is that if you use 96 DPI and see that your inserted images are still coming out blurry, check your Text Size settings in Windows and adjust the DPI value accordingly.
I'm using Windows 7, and have been trying to copy a selection from Excel 2007 to an email in Outlook 2007. When I do this, and select "paste as picture" from the options offered, it looks perfect. But once the email is sent (and Outlook compresses the picture), it looks like total garbage. It's mind boggling that anyone at MS could believe this default behavior is acceptable.
The solution in this case is to paste from Excel into MS Paint, then COPY the selection from Paint (no need to select again, since it's already selected after the paste), and paste into Outlook. Passing the image through MS Paint somehow resolves this problem, at least under these specific circumstances.
I would suggest always TEST sending any image, before sending it out officially.
Don't mean to be a necromancer on this question but none of the above solutions solved this issue for me. The only way I was able to solve the issue was by deleting the following key:
HKCU\Software\Microsoft\Office\14.0\Word\Data\SettingsWordMail
After five years of having this issue, I can gladly say I have finally figured out which key was causing the problem, greatly reducing my blood pressure.