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Well, I think I've figured out what to do. Just set the 'save as' to HTML and layout to 'flexible layout/html' and it will put the pictures in the right place relative to the text, when you set it to epub output it just drops all the pictures to the bottom of the page. Of course, I'll have to take the resulting HTML and convert again to ePub but that shouldn't be too hard.
And David thanks for the tips on attaching files, I'll bear that in mind!
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