Problem: "Outlook isn't blocking the images in some of the messages I receive."
Outlook 2003 includes a popular feature that prevents external content from being downloaded. Its effects are most noticeable with images, because the image placeholder contains text that tells you to 'right click here to download' the image. Along with images, style sheets, scripts, and other content is not downloaded unless you tell Outlook to download it.
This feature was added, in part, to prevent "web bugs" from identifying you. Any time any content is pulled from a web server, the server logs record it. If the URL is crafted to include a tracking code, they sender can identify who downloaded content. While it's not a guarantee that a specific person actually read their message (or didn't read it, if you block external content), many advertisers and spammers use the technique to validate addresses or track advertising campaigns.
When you use a dial up connection, you can leave the external content blocked and read your mail offline, without Outlook attempting to connect to the Internet to download the content.
Because the external content is not downloaded automatically, many spammers began embedding images in the messages. If you right click on the message and choose view source, you'll see something like this:
<html><head><meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"></head><body bgcolor="#FFFFF3" text="#D2061D"><p><a href="http://simsale.com">
<IMG SRC="cid:part1.00020306.04050607@email@example.com" border="0" ALT=""></a></p><p><font color="#FFFFFC">the blackout in 1876 where do you live? All your base are belong to us</font></p><p><font color="#FFFFF3">Cindy Margolis Which one </font></p></body></html>
The reason the image isn't blocked is because it's sent with the message and is embedded in it, as identified by the Content ID in the image source:
<IMG SRC="cid:part1.00020306.04050607@firstname.lastname@example.org" border="0" ALT="">
Because the image is not "external" Outlook doesn't block it and the feature is working as designed.
If the junk mail filter is not moving these to the junk email folder and the images offend you, you'll need to switch to read as plain text messages or disable the reading pane. In most cases, you can tell by the senders name and subject if the message is likely legit or something you want to read. After deleting the spam, turn the reading pane back on.