Technology blogger Helen Bradley discovered that there's no obvious way to insert text from a file, rather than simply attach the file itself. If Microsoft's ribbon logic was consistent, there'd be an option on the Insert tab, but there isn't.
To actually get the task done, you need to select the Attach file option. After picking the file, click the drop down next to the 'Insert' button, and select 'Insert as text' instead. Bradley's post describes the process for Outlook 2007; the same system is used for Outlook 2010 as well. We can hope Microsoft might fix this in a future release; after all, how hard would it be to add a 'Text' button in the Include group on the Insert tab?