Tosh McCaber,
There are two things going on here. First, lets get .jpg associated with IE again. When you installed QT, it associated .jpgs to QT. With Win ME-2k-XP you can right click on any .jpg and go to Properties. In there you can use the Change Button to change the association.
As for the Hotmail issue, all email clients are supposed to be compatible with each other, (in theory), but that is not usually the case. If the part of an email or attachment comes though as a .dat or a .tmp, usually the coding of the attachment did not get though as it should have. A simple solution is to try using WinZip to zip the .jpg and see if it comes though intact after being emailed.
Take Care,
Richard