Hi,
one more thing, after clicking on inset picture button ,you must get one text box and one button to browse the image in your system .and after that image will get inserted in mail form.
you can also inset image in mail form by inserting attributes context by clicking on attribute button in mail form, but for that you need to maintain attribute context in IMG.by following below path you can achieve .
SPRO -> CRM -> Marketing -> Marketing Planning and Campaign Management -> Personalized Mail -> Maintain Attribute Contexts for Mail Forms.
and try to implement code in badi CRM_IM_ADD_DATA_BADI.
Hope this will help you.
Regards
Bhavana