Drupal Association members fund grants that make connections all over the world.
After upgrading to Drupal 7.20 inline images which are output using an image style (e.g. thumbnail, medium, large, etc) are not correctly inlined in the email, rather they are just available as attachments and then do not appear inline.
So far I've been able to trace it back to Mail_Mime PEAR class. Still no solution as of yet.