The functionality does work. Sometimes it's difficult to diagnose what exactly someone's doing wrong if you're not looking over someone's shoulder and seeing what exactly they're clicking.
(Problems like these we call clickology.)
If you've got a jpeg you'd like to use as a logo on your products, I'd suggest creating a cosmetic sketch (Insert > Cosmetic > Sketch) or a flat surface (Insert > Surface > Flat) on the part, and applying the jpeg using the technique in dougr's post.
Did you say you haven't purchased the software yet? If not, I'd suggest going with WF instead of 2001. The 2001 code is 4 years old, and WF is tons faster and easier.