When creating a Mail Merge template for use with Redtail CRM, you can include images or graphics on these. You just need to make sure that you add them to the template prior to uploading to Redtail CRM.
If you have done this, but the image doesn't display on the individual documents after you run your merge, you'll need to change the file type on the template. While you can't make this change within Redtail, you can download the template from within Redtail under Manage Your Account —> Mail Merge Templates. From there just right-click the template and select the option to download it. Then, save it as a .doc file rather than as a .docx file. You'll then need to delete the previous version from your CRM (to avoid confusion) and upload the .doc template.
Your image(s) should then display after running your merge.