The above line of code when set to false skip the inline attachments in your mail during rendering to MHTML. You mentioned that JPEG was getting rendered in MHTML.
Aspose.Email can convert MSG to MHTML and can display regular attachment names only. The inline images can be rendered in the body as well, however the contents of regular attachments cannot be rendered to MHTML and hence to PDF. This feature is not supported by Aspose.Email.
If your email has got attachments like Word, Excel, PDF or PowerPoint, you will have to use the respective Aspose APIs to extract the attachment content and render them separately to PDF. I suggest you to please visit following thread as well. I hope this will clarify the concept.