You're correct. I hadn't gotten around to testing this in Word 2007, but it is
as you say. I suspect this is a side effect of the changes made in the program
code to make the context-sensitive tabs of the ribbon such as the Picture
Tools tab appear when needed. The behavior is the same in Word 2010.
It looks like the only way to get the picture-in-macrobutton function back in
Word 2007 or 2010 is to save the template in Word 97-2003 (*.dot) format or,
alternatively, to save each document based on the .dotm template as a Word
97-2003 (*.doc) document. Of course, that means you can't save anything in the
file that uses new features of the later versions (e.g., Smart Art), but
whether that's important is up to you.