Stationery pic changes from a JPG to a GIF

Hi,
I use Outlook 2002 and I am very frustrated trying to set up my htm
stationery.
I put all the files where they should go and when I open a new mail window
the stationery and pics are there and look great.
When I send it to someone (including myself) the JPG pic in the banner is
grainy.
I checked the initial files and found the original JPG banner there and a new
GIF file. I delete the GIF and open and send another email and the GIF file
returns.
Obviously there is a setting somewhere that needs to be changed but I cant
find it.
I have done extensive Googling and have not been able to find anyone else
with the same problem.
Can anyone help please?