Images show only when they are hosted on the web (Sigmate Pro does this for you). A photo pasted directly into the signature box becomes an attachment.
Phone check: after step 5, send yourself an email from the Gmail app and confirm the signature appears. If it does not, the iPhone Mail app is the reliable way to send a rich signature from a phone (guide above). Size note: Gmail rejects signatures over roughly 100 KB, which is why Sigmate keeps animated photos around 60 KB.