I know this thread is old, but I've had nothing but trouble building with images, and this is what I discovered today. This may help anyone else who is trying to troubleshoot their images. I'll preface with saying I'm using Mobipocket Creator version 4.2 build 41, and my OS is Windows 10.
My images built with this source link and were not visible in the ebook:
<vshape src="BurningBooksARC_files/image003.png" o:title="image003"/>
</v:shape></span></p>
Once I changed them, they worked fine. Change them to:
</v:shapetype><v:shape id="Picture_x0020_5" o:spid="_x0000_i1025" type="#_x0000_t75" style="width:138pt;height:2in;visibility:visible">
<img border="0" src="BurningBooksARC_files/image003.png" o:title="image003"/>
</v:shape></span></p>