Best Practices for inline elements

Can any one give me some advice on how to handle inline elements.

For example: bold, italics, underline and inline images.

I am formatting all of my XML docs to HTML and I really don't know how to handle the inline stuff.
I have items that need to be bold but are scattered through out the documents.

example:
<para>
Some text <bold>text</bold> more text <italics>text</italics> more text <image src="icon.png" />. Some more text.
</para>

All of my files have to be generated on the fly through IE.

So far I have not been able to find any examples of code like this. Is this just not done? Or is it just so simple I can't see it. 

So far everything I have tried has either given me the inline elements formatted after the paragraph but never formatted "inline", or just nothing at all.

Thanks
Brad


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