I created a word document that has a picture/logo, text box & a hyperlink for
replying to our business. When I view the image in word, it looks perfect.
When I send via mail merge to various email addresses, the quality of the
fonts & images become quite poor.

I also had the issue of when I view the "sent message" the text is stripped
out. But it seems that all the recipients received the text just fine.

My mailto: link is also not active when the recipeint receives it.

I am not merging any fields except the to: for email.