First verify the following option is checked in SnagIt. Click Tools > Program Preferences > Program Options tab > Embed images when sending email.
If the problem persists hit (windows key + R) and type regedit. The registry editor will open. Make sure Outlook is completely shut down.
Browse to HKEY_CURRENT_USER\Software\Microsoft\Office\12.0\Outlook\Options\Mail
A registry key with "Send Pictures With Document" should be there with a value of 0. Right-click on this entry and delete it.
Try performing the task again.