Yes images will help people from clicking away from your site due to very long content like an article. But you must strike a balance, too many images will break up the reader's concentration while reading. Here too, you need to do some research and view other websites and see what your eyes like.
I think one image every three hundred words is nice. But make sure the image contributes to the content that it is next too. Also it doesn't need to be a picture, it can be an Advertisement. Marcus has two plug-ins that are Ad related that breaks up an article nicely by blending in the article with the Ad.- Get more information from the tools in the toolbar.
If you have bullet point paragraphs, you can have image icons for each bullet, I do this a lot and I think it contributes to the overall appearance to the page versus just a bullet dot before the sentence.
Also for SEO stuff, title your images with long tail keywords. This is a plus for organic ranking in the search engines.