There have been a lot of requests to embed images rather than use a web image. We would love to too! Here's why we had to choose web images.
The first design decision we had to make when creating Signature was whether we would use your Mail application on your phone to deliver your emails or to route the emails through our own server. We chose to use the iPhone Mail application because your recipients have probably put you in the safe senders list. Using an unknown email sender (i.e. sender through our servers) will often end up in the recipient's spam box or junk mail. Using the iPhone Mail application means you can also add the signature to email replies and email forwarding. (Simply open the email you wish to reply or forward in your iPhone mail app) before launching Signature.
First design decision #1: Use the iPhone Mail App and not a third party SMTP (email server)
Now comes the question of how to insert the images in your signature.
Method #1: Use a web image.
Pro: There are lots of advantages in doing this. Your outgoing email is much smaller and it will cost you less bandwidth and time to send since the signature contains image links and not whole images.
Con: If the recipient has disabled HTML or images, they will not see the images until they enable images in their browser. Generally, with most of the email clients we tested on, unless the user has disabled image viewing, this should not be a problem.
Method #2: Embed the image directly in the email body. (will be filtered out by most email clients)
Most email clients filter out directly embedded images in emails due to its popular use in spam mail. Exceptions are emails viewed in Apple products (iPhone Mail and Apple Mail) which still show these images. However all of the popular clients we tested will filter out the images embedded this way.
Method #3: Send the image as an attachment and refer to the image attachment in the email. (not supported on iPhone)
This is how Outlook (and recently Gmail do it). It also pretty much guarantee that the image will be shown (as our tests have confirmed). The bad news is that there is no way currently for us to launch the Mail app and add an attachment at the same time. In 3.0, we could launch an Mail Compose view and add an attachment, but the API does not allow us to associate the image in the body with the attachment. As a result, the recipient sees it like an attached document and not as part of the signature.
So in the end, we believe that the combination of using the Mail App and web linked images is currently the best solution that allows the greatest chance for users to receive your mail and most if not all of your receipients to see your signature.
So we continually look to Apple for more flexibility in their API and wherever possible make Signature the best utility in its class. After all, we use it ourselves everyday. So we suffer from the same limitations as you do.