I FOUND IT. In my opf file, instead of
item id="image1" media-type="image/jpeg" href="Blahblah.jpg"
... images/jpg ... instead.
Now Nook likes it and shows all pictures.
It was Sigil that explained this to me.
Thank you to all respondents for turning me on to ePubPack and Sigil. They have made my life much easier.