I just had a discussion with Dave Raggett about this... <FIG> is
meant to compliment, not replace, <IMG>. There's a lot of history
behind the current spec. Some of it is technical, but some of it
is political stuff that I won't go into.
Suffice it to say that HTML 3.0, like many other markup languages,
includes two idioms for graphics: the <img> element for phrase-level
stuff, like little funny characters or inline icons (or inline
math formulas or ...) and <fig> for "displayed formulas" or graphic
callouts or ... .
The fact that the functionality of <img> doesn't include things
like client-side image maps and other consequences of using an ALT
attribute rather than content (e.g.
<image src="xxx">alternative <em>nifty</em>stuff</image>
) is an unfortunate consequence of some historical decisions.