With the advanced layout options, you can replace the text for menu titles with images using the <!--System:Menu:StaticName--> command. Is this what you're referring to, or are you talking about with the standard layout?
A little guide on how to do simple image insertion via the menu.html file might help the masses that want to do it.
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Six Demon BagJack Burton: Hey, what more can a guy ask for?
Egg Shen: Oh, a six-demon bag!
Jack Burton: Terrific, a six-demon bag. Sensational. What's in it, Egg?
Egg Shen: Wind, fire, all that kind of thing!