Local images with links are not clickable, and have the external link icon offset when in Reading mode

I know it’s valid syntax for html. Have you seen any evidence in Obsidian documentation that a local vault path would be recognized?

An html relative filesystem path on a server and a local Vault path aren’t equivalent. They just look identical in syntax.

I agree it would be great if it worked. I’m just brainstorming why it might not be.

Example, relative images have never worked in html syntax for text links. I don’t know if that has ever changed: