more tag, replacing it with an image

Have a look at the docs.

i already read it ?? im i right in saying i just delete the txt and replace with <img src=”/images/image.gif”

Yes if you have a images folder directly off of your root folder if you put the image in your templates images folder you’ll need to do this.
<img src="<?php bloginfo('template_directory'); ?>/images/image.gif" />

thank you