http://support.microsoft.com/kb/908520

When you reply to an e-mail message in Microsoft Office Outlook 2003, your e-mail signature does not appear in the e-mail message. You experience this symptom even if you configured Outlook 2003 to include an e-mail signature every time that you reply to or forward an e-mail message.
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CAUSE
This problem occurs if you configured Outlook 2003 to use the Attach original message option when you reply to an e-mail message. If the original text of the e-mail message is not included in the reply, the reply header data is not created. In this situation, Outlook 2003 cannot determine when to add an e-mail signature to the e-mail message.

Service pack information
This problem is corrected in Office 2003 Service Pack 3. To resolve this problem, obtain the latest service pack for Office 2003. For more information, click the following article number to view the article in the Microsoft Knowledge Base:
870924 How to obtain the latest service pack for Office 2003

I just found another post by rewording my question and found a solution to
the problem. If you re-create your signature using Shift+Enter, instead of
Enter, after each line you should find that your signature will not be
double-spaced… not sure if the logo problem will still exist.

Are you running Windows XP?

“Bobok” wrote:

> I created a business signature for my emails, containing the company logo and
> using “rich text” format. When I compose an original msg, the signature
> displays correctly. However, when I forward or reply a msg that was composed
> in plain text or HTML, my signature displays incorrectly–double-spaced and
> minus the logo. I formatted my messages to always use my fonts when replying
> or forwarding. Can anyone help? Thanks very much.

http://www.pcreview.co.uk/forums/re-email-signature-format-changes-forwarding-replying-why-t2395060.html