Word is actually very easy to set images in, but don't try to take them back out of Word and use them for anything meaningful. It turns them into gobbledy gook once they're there. They look fine, but they don't translate well from Word to say, Photoshop.

Right clicking is the trick in Word, and from there choosing to format the photo. It doesn't matter what size the photo is (except that it will take tons of disk space if it's too big, and look pixelated if it's too small) because you can simply tell it what size you want it to display. At the same time you use those icons (the ones with the picture of the dog) and set the wrap features.

SRS