ut it appears to me that you can't hard code images into the template using the <img> tag? is this true??
Of course you can. If you have saved the image in the current themes image folder you can use $ThemeDir as a shortcut even
Eg if your image is in themes/blackcandy/images/MyImage.gif
You can <img> it with
<img src="$ThemeDir/images/MyImage.gif" alt="My Awesome Image">.