A little bit more about this.
It seems particularly a problem if I try to attach the photos to a message to which I am replying. If I create a new message from scratch, the problems seems not to be there, but every time I use "Reply", the message size shows as "10kb" regardless of how many attachments I have added.
If I type my reply text, delete the text of the original message, exit Mail and then come back in again and add the attachments to the message, everything works properly too, but it ought not be this way, and wasn't this way, before the Mountain Lion upgrade.
This is a bug in Mt Lion, and was present in the beta but I think not found in time for the final release.
There is a workaround.
When you attach a photo, you will get in the top right of the message window a toggle box that defaults to "actual size"
If you toggle this to another size and back it will show the actual size image size as it should. Also it you have multiple accounts you can send from, then you can toggle that too, and it will do the same.
Mountain Lion / Macmail Bugs:
Here is what I know so far:
When originating the email, with attachments, from iPhoto: Mail won't send if even one png attached. Mail WILL send if 1 jpeg attached, but not multiple jpegs. Someone at Apple told me that this is because I am using iPhoto 09, and "MtLion was not designed to work with" 09. He suggested, but would not guarantee, that these problems will disappear if I upgrade myiPhoto. Thus, forced obsolescence. Too bad... I like iPhoto and iMovie 09. It's not the cost that has kept me from upgrading. (Can anyone with new iPhoto and Mt. Lion tell me whether these problems exist for you?)
When originating the email from the mac email app: The attachment size adjuster is there sometimes, but is not there at other times. This is true even for a new email, not just a reply.
I can't send an email from iPhoto at all now that I upgraded to Mt. Lion - I just got ML today and discovered the problem. I get a message that:
Your email did not go through because the server did not reply.
Check your Internet connection. If the connection is working properly, the email server may be down. Try sending your email again later.
There is nothing wrong with my internet connection and my mail is working fine. Please don't tell me that this is a permanent bug in Mt. Lion!!