QUOTE(dcp @ Jun 16 2012, 08:22)
It's beginning to look like it's something my friend is doing because looks like the problem is only with his pic emails -
Correct, when sending an email from hotmail and adding a picture, you have the option of adding the picture as an attachment (increasing the email size) or saving the file on skydrive (which is the Microsoft cloud storage). The email size will be smaller, but the one receiving the email (you) has to download the image from skydrive first before being able to view it.
Ask your friend to send the picture as proper attachments instead of saving them on his skydrive, that should fix your 'problem' (though it's not really an error, because as you said, once you've downloaded the image you can view it. It does work as it's supposed to do
Hope this helps