Assuming you're using Crystal XI or 2008, go to the insert menu and select Picture. Select a "default" image file. Put the image in the appropriate place on your report and size it.
Right-click on the image, select "Format Graphic", and click on the Picture tab. Click on the formula button for the Graphic Location. Type in the path to your image files + {table.Item_No} + ".jpg" - you'll probably want to use a UNC path instead of a specific mapped drive so that this is generic enough to run from any machine.
Click on "Save and Close", click on OK. Run your report.
-Dell