Rose,
I can confirm the behavior you describe in PPT 2003. It appears that
if you are dragging the file into a placeholder textframe (includes
AutoShape textframes) PPT is establlishining a hyperlink for you
automatically to that file.
If you just drag it to the page, which does not contain a textframe
then you get the actual picture.
I'm not sure if this is new behavior or not, I haven't used anything
but PPT 2003 for quite some time now and forget when MS introduced
hyperlinks.
Brian Reilly, MVP