Some further probing showed that it worked by me as well! But with one LaTex related restriction that I missed. The included filename must not include more than one period! In my original file I had part of the experiment conditions encoded in the name, e..g. lc-p0.5.jpg . This works fine in HTML but fails in LaTeX.
Running pdflatex on the tex file yields:
! LaTeX Error: Unknown graphics extension: .5.jpg .
The problem has nothing to do with the org exporting, and is a LaTeX limitation that I can live with. Case closed. :-)
Regards,
Dov