Just to clarify the above I'm using Version 2012 (Build 16.4.3528.0331)
I have went into Options, Safety Options, Security and removed the checkmark from, 'Block images and other external content in HTML email.' I have left the checkmark in the box below, 'Show images and external content sent from email addresses in my safe senders list.' I have even tried rebooting to see if that made a difference but it didn't. Everything was working fine last week and then I had a problem with Live Mail and had to reinstall it. Ever since I've had no images.