Anyone who is using Reporting Services 2000 and rendering the report in HTML has porbably seen the error rsStreamNotFound with embedded or external image. While reading through various blogs one thing that was clear to me was there was a problem with session and cookies in reporting services which fail do deliver the stream. The work around I found was changing the field value of "UseSessionCookies" in ConfigurationInfo table in ReportServer DB to 'False'. This probably helped many people solve the problem, but mine didn't work.
I did notice that the image was now working properly for me in Firefox, however was unable to render in IE. So one thing I tried was converting my jpeg to gif and guess what? It worked! I have been in similar situation in Crystal Reports where I couldn't use jpeg (or gif, its one or the other). So I had to convert it to a different format.