Opening an existing map document (*.mxd) file produces the following error:
"Invalid raster dataset. Failed to insert picture element."
An inserted picture element in the Layout of the map document has become corrupted or is empty. This can be caused by moving the source of the inserted picture on disk, renaming the picture, or deleting it altogether. An inserted picture, by default, will only contain a path pointer to the raster file like a layer. If anything happens to the raster on disk that does not allow ArcGIS to locate it, the picture element becomes invalid (empty) and the error message is the result.
The invalid element must be removed. The document can then be recreated with the new copy of the raster.
Note: There may be more than one invalid picture element in the map document. If you get the same error message reopening the document, repeat the process until the error message stops. If it does not, then there could be other corruptions in the MXD. Contact ESRI Technical Support for further assistance.
To avoid this error in the future, you can store the picture within the map document. In the Properties of the inserted picture, on the Picture tab, there is a check box for "Store Picture as Part of the Document". This option will store the image data in the MXD file. This will increase the size of your MXD, but will ensure that the picture will always be there. This is NOT suggestible for large files. Small company logos, for example, would be fine.