Can images or scanned sketches be attached to a log entry?

Yes.  You can link JPG or BMP files to your observations using the Observation Browser or the Add Observation function - available by right-clicking an object in any report except Darkness and Log.

The attached image is displayed in the Observation Browser and in the Detailed Observing Log report.  The Detailed Observing Log report can be printed or exported to HTML for publication on the web.  The image is included on the print out and in the exported HTML file.