This cypher is a complete waste of your time, and effort. Please, abandon your efforts on this, and concentrate on something more worthwhile.
1) It is a substitution cypher. Regardless of the fact that you are using images to substitute for characters, it could be broken by a ten year old in almost no time at all. Security? None in practical terms.
2) Do you rally think that using images instead of text improves your security? I have free software on my HDD, that is for recovering images from Camera memory cards. It looks at all the raw data on the card, and works out what might be an image, and extracts them into an ordered list. It works. Feed it your Word document, and it will extract the images just as well, I suspect.
3) It is not just the image size that makes this a silly idea: Word also adds on it's own layer of "stuff" around each picture you insert, to tell it where it is to be placed, what the frame looks like, how text should wrap round it, etc., etc. Some quick testing with a 883 byte 1/4" x 1/4" jpeg showed that each file added to a word document increased the file size by 1.5K. So each "character" in your input data takes 1,500 bytes to store in a low security format...
It really isn't worth doing: use the .NET built in security (see the System.Security.Cryptography namespace
] for details. These are high security, proven methods which are easier to use, and produce a better, smaller result than your cypher.