Jim,
Word would not be my first choice of software for web work or newsletters, but it does work. If you are used to it and don't want to spend $$ on a different package here are some things you can do to help keep your file sizes small.
It sounds like most of us know about the compress pictures option in Words Picture Toolbar. You can have it operate on just one picture, or on all pictures in the document, and you can set it to optimize the picture for the web. You should check the option boxes to compress and to delete cropped areas. This is as good as it gets with Word though.
You can get much better compression if you do your picture prep in an image editing program before putting the image into Word. Software like Adobe Photoshop is what most of us use, but almost any 1/2 way decent editing package will let you resize and compress the image in the ways I will describe.
The key to this is to think of your image in terms of how you will use it. Will the picture be printed or will it be viewed on screen only?
If the document is to be printed Then you need to think about how wide the printed picture will be in inches, and how tall it will be in inches. Chances are a newsletter is designed to be printed on 8.5x11 paper. So a given picture is not likely to be bigger than 2x3 or 4x5 inches, somewhere in the range. Then, on top of that you need to decide how many dots per inch will be in the image (dpi.) This is pretty easy since it is very unlikely that any of us has a printer at home or in our offices that can utilize more than 260 DPI in an image. More than that is simply ignored by the printer. Size the picture based on what its printed dimensions will be, and not more than 260 DPI and you should be in good shape. Save it as a jpg file and use as high a compression as you can without creating artifacts in the image like excessive graininess, or color banding, or halos around objects.
One last point when printing. Don't confuse the dpi number of an image with the dpi rating of a printer. They are completely unrelated numbers. You can print a 4x6 inch image with 72dpi on a printer set to print 2880dpix1400dpi. The printers number simply tells you how many dots of inch will be sprayed on the paper as it prints.
If you are doing the picture primarily for use on screen, like a web page, then don't size it based on the size in inches, size it based on the length and width in pixels or dots. One pixel on the screen will show 1 dot from the image. If your monitor is set to display 800 dots across and 600 dots down, and you have a picture that is 400 dots across and 300 dots down the picture will take up have the screen. 1 dot for 1 pixel.
A pretty safe assumption today would be that your users are not using a monitor set to less than 800 x 600 pixels and use that as the frame your picture will be in. Your page in other words. Chances are that your image will be 200x300 pixels, or some other similar number. If you know all your readers all have bigger screens than that just adjust the numbers accordingly. In this case, you are concerned with 1 dot of the image being presented as a dot on the screen, which is why you think in terms of pixels in width and height rather than inches in width and height. You still want to save the file as a jpg and and use as much compression as you can without creating the artifacts I mentioned earlier.
So......if nothing else use the compress picture option of the pictures toolbar with both of the option check boxes selected.
Or....preferably edit your images before you insert them.
If the document is to be printed set the dimensions of the picture to what it will be printed out as in inches (widthxheight) with no more than 260dpi. Then save it as a jpg with as much compression as you can without causing the image to noticably deteriorate.
If the picture will be used on screen only then size it based on the pixels only. Not dpi. One pixel on the screen will display 1 dot of the image. Again, compress the jpg as much as you can without noticeably affecting the image.
email me if you need additional help with this.
Dave