Hi Fred,
Unfortunately, when you select whole document translation from within Word, when it sends it to the Microsoft Translator service, images are not included. This is "by design" due to bandwidth issues.
One work around I can think of is to save the documents to html format. When you open the documents in IE, and use the BingBar tool to translate the document from within IE, you will get a translation that preserves the document format, including the
placement of images.
Not the most perfect solution, but certainly better than having to reconstruct your documents via copying and pasting images.
Sincerely,
William Lewis
Microsoft Translator Team