Byte[] bitmapData = Convert.FromBase64String(FixBase64ForImage("Base64 string"));
System.IO.MemoryStream streamBitmap = new System.IO.MemoryStream(bitmapData);
var imageToInline = new LinkedResource(streamBitmap, MediaTypeNames.Image.Jpeg);
imageToInline.ContentId = "Pic1";
AlternateView avHtml = AlternateView.CreateAlternateViewFromString(mailMessage.Body, null, MediaTypeNames.Text.Html);
avHtml.LinkedResources.Add(imageToInline);
mailMessage.AlternateViews.Add(avHtml);

public static string FixBase64ForImage(string Image)
{
System.Text.StringBuilder sbText = new System.Text.StringBuilder(Image, Image.Length);
sbText.Replace("\r\n", string.Empty); sbText.Replace(" ", string.Empty);
return sbText.ToString();
}