Hello Tim,
You can't transclude external resources, such as images.
I can see where your confusion comes from, though. In the docs you see:
{{Motovun Jack.jpg}}
which looks like a regular file name. But actually what is happening there is that it is transcluding a tiddler,
that happens to have a name that looks like a file name. If you go to
tiddlywiki.com and put "motovun" in the search box,
you can navigate to the actual tiddler, "Motovun Jack.jpg"
A lot of the tiddlers, especially system tiddlers, look like file paths, which cause me a bit of confusion at first.
Good luck!
-- Mark