In a multiple choice quiz setting, there is a tab "Combined Feedback". Inserting an image in the feedback field will either display a broken image or display no image (depending on the web browser you are using). However, inserting an image in the Answer Feedback field works.

Further testing shows that it works in other answer feedback fields but specifically not in the "Combined Feedback" field.

This has been tested on Moodle 3.0 and the latest version on Moodle Cloud.