displaying a picture that a user "selects" by loading it into an image element using an absolute path to a file on the user's computer will only work in IE, and it will only work because IE is bad =P

to "get" the picture you can send the form to a PHP script, and it will be in the global $_FILES array, or you can use Perl, and strip the picture from the form-data by searching for Content-Delimiters (which are sent in the Form header). If none of that made any sense, I'd advise learning PHP (or better still, Perl =P).

PHP example:
http://www.phpfreaks.com/tutorials/36/0.php