Link to product image

You could make this work by adding IMG tags into your filter for the body too. I figure what you are asking for is a field with a URL for an image to include on the wishlist entry.

Should images of any size be embedded into the display?

Should a horizontal or vertical size limit be placed on them?

Where do you want the images displayed? On the full node display, the teaser display, the wishlist items table (here image size becomes an even greater factor)?

So many other modules handle image uploads against nodes, embedding images and general image management that I don't see this as a feature that should be baked into the wishlist module. A lot has matured in imaging handling in the Drupal ecosystem in the past year.