You can use a Section or Description Area field to insert an image into a Formstack form. First, you would add either a Description Area field or Section. Then click on the "add image" icon in the toolbar for that field.
From here you can upload an image by clicking on "choose file" or dragging and dropping the file in the dotted lined square as shown below. Also, if you want to use an image that you uploaded to another form you could click on the "choose" option which will list all other pictures you have in sections and description areas throughout all the forms on your account.
You'll now see a message that your image has been uploaded.