I tested this:
Option Explicit
Sub InsertImageIntoSelection()
Dim rng As Range, wsh As Worksheet
Dim sFileName As String
On Error GoTo Err_InsertImageIntoSelection
Set rng = Application.Selection
Set wsh = rng.Parent
sFileName = "C:\SomeImage.jpg"
wsh.Shapes.AddPicture sFileName, msoFalse, msoTrue, _
rng.Left, rng.Top, rng.Width, rng.Height
Exit_InsertImageIntoSelection:
On Error Resume Next
Set rng = Nothing
Set wsh = Nothing
Exit Sub
Err_InsertImageIntoSelection:
MsgBox Err.Description, vbExclamation, Err.Number
Resume Exit_InsertImageIntoSelection
End Sub
and it works great!