If i leave the HTML templates as the default:
<img src="email/header.jpg" alt="logo" />

The email just displays the red X

If i change it to point at:
<img src="www.rstuning.co.uk/zentest2/email/header.jpg" alt="logo" />

It works fine.

Is this because my site is currently sitting in a sub directory?

http://www.rstuning.co.uk/zentest2/index.php

I have searched the forum but can't seem to find an answer so any help is much appreciated as I would love to go live with the site ASAP :)

Using v1.5.0

Cheers

Paul