Yes! You can easily add player photos to Baseball Mogul. Go to Baseball Mogul's Help Menu and select 'Open Baseball Mogul Folder'. Double-click on the 'Photos' folder.
The 'Action' and 'Portraits' folders contain photos of real players. The 'Generic' folder is only used for fictional players created by Baseball Mogul. For Baseball Mogul to recognize a new photo, it needs to be a JPG with a filename matching the player's ID string (e.g. "abbotje01.jpg").
Player ID strings are formed by combining the first 5 letters of their last name with the first 2 letters of their first name, and then adding '01'. If that string is already is use, increment the number ("02", "03", etc.) until a unique ID is found.
An easy way to verify a player's ID is to open his Scouting Report and clicking the player's name. This will open that player's page at baseball-reference.com, where the player's ID string is part of the URL:
The photos included with Baseball Mogul are either 160x200 or 320x400. If your photo is a different size, it will be automatically resized on-the-fly.