Using "rich text" format in Yahoo ("compose messages as color and
graphics"), I composed and sent a message that included a smiley icon,
not a character-graphics smiley; that is, not :-). When I read the
message using OE, the smiley icon is replaced by a graphics image
placeholder; that is, an icon showing a box with a red "x" in the
middle.

Is this normal? Or is there something I can do in my OE configuration
to remedy this?

I presume that the image placeholder (red "x" box) indicates that the
GIF with the Yahoo smiley icon is not accessible. The HTML shows the
following reference:
IMG src="http://us.i1.yimg.com/us.yimg.com/i/mesg/
tsmileys2/01.gif" . But when I put that URL into the Address field
of IE6, I have no problem seeing the intended smiley.

So why couldn't I see the smiley in the normal view of the OE message?

I do not think it is an intermittent network failure. I reopened the
message repeatably, including times close to when I tried accessing
the GIF URL using IE6.

I have OE6. I am running Windows XP Pro 2002 SP2.