Outlook automatically reduces the size of the image
For some things you may not want the image quality to decrease, for instance copying text from a PDF (using the Snapshot tool), as it will appear fuzzy.
When going to paste the image into the body of the email, select the Paste Special option (from the Paste button, under the Message tab).
This will give you the option of pasting it as a BITMAP or DEVICE INDEPENDENT BITMAP, either of these will give you the original picture without quality loss.
Be aware that the size increase can be significant (e.g. x 10 bigger).
I haven't worked out how to change the settings so it inserts the picture as a bitmap as default.