As a standard practice, I always follow any <img> tag with a on the
same line. It isn't necessary if you have another closing tag immediately
follow the <img> tag but I always try to do it as a matter of course. I also
always include a border value. Try it, you may be surprised.

So, the final HTML should look like this:
<td>
<img src="jpg" border="0">
</td>

Or

<td>
<img src="jpg" border="0"></td>

I'm not sure why IE renders this way, but it has for several versions. But
now you know why VS.NET always moves the ending tags to the immediate right
of the last item in the last cell. Very frustrating but a totally different
topic.