When I wrote "Set the <SRC> element of the Image display ..." I meant you should pass it the value you wish it to receive (using a flow arrow), rather than renaming it, as you seem to have done.
The correct model is demonstrated in the following screenshot:
As I explained in my previous post, you should also copy the relevant file (in this case MissingPicture.jpg) to the project's web folder, rather than leave it in D:\Documents and Settings (as appears in your screenshot).
Regards,
David
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