Hi @MollieRhodes,
We had the same problem at my institution and Instructure support said to change the way we copy the quizzes, by using the Export/Import tools within New Quizzes instead of the Course Content Import tool or the super simple Copy to option next to individual quizzes.
These are the instructions they shared for exporting a New Quiz with images:
https://community.canvaslms.com/t5/Instructor-Guide/How-do-I-export-a-New-Quiz-from-a-course/ta-p/58...
And here are the instructions on how to import a QTI package in New Quizzes:
https://community.canvaslms.com/t5/Instructor-Guide/How-do-I-import-a-quiz-from-a-QTI-package-in-New...
Honestly, I think the Export/Import tools require more steps and are much more difficult to find/explain to instructors, so I'm hoping the problem with embedded images gets fixed in a future release. Being able to use the Copy to function or regular Course Content Import tool is so much easier and these are the steps we've been telling faculty to use for years.