Thanks for the reply Supportskins,
It seems like that's back to my original problem as near as I can tell. Unless you're suggesting something I'm not clear on, using html img tags requires the ability to place an image on the webserver so you have something to create a tag for, so it would appear to me that it's a circular path. (forgive me if I've missed your point, and please do clarify if I have.

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Chicken vs egg kind of thing?
Staff do not have access to the webserver (which, afaik would be the only way for them to place files on it, but I'm not a server admin guy, so maybe there's a workaround I'm not aware of...)
If there is no way around, then it's broken functionality.
No doubt Kayako are aware of the limitations of this part of the product. I did a quick (informal) review of their own KB and of the 67 articles I clicked through, only 1 had images in it. One could argue that these particular articles may not need images I suppose & I wouldn't disagree in principle. For the software product my company produces and supports, which is very complex, our clients find screenshots invaluable. If we can thoroughly explain something in a KB arictle, it's a call to support we can avoid and a happy client to boot!
There are a lot of great things about this product that I like, this just happens to be an area where it's lacking in my opinion. My post here will (hopefully) be seen as constructive, I'm simply trying to help the product get better, while meeting my (and hopefully others) needs.
This community is a creative lot, and if there is a way someone has solved this problem in a Win2003 server/WinXP client environment, I'd be grateful to hear it. Perhaps others would as well.
Thank you for your response.
Best regards,
Rich