I had this prob too..
1. you have to open the picture up by itself in a seperate window
2. copy the address from that window
3. go to the edit signature section in user cp
4. click on the icon of the mountains above the white box where your sig goes
5. lastly paste the address of the pic in the pop-up url box that appears
and wala!! you have a piture in your sig!!!
hope this helps -mike