You are not breaking apart the image you brought in, just a copy of it. So if you followup by deleting the image (jpg/gif/etc) that you imported, you remove the source that the copy needs.
If you were to use the Trace Bitmap command (Modify -> Bitmap -> Trace Bitmap) instead of the Break Apart, then you would end up with something that doesn't require keeping the original image around.
If you still have all the library objects with the little green tree cons, then I can't say why things turned red, though I would guess that somehow the images have been disconnected from the symbols (or vice versa) That's assuming the objects you are saying are red are the ones that hold images. You might try searching Google to see if anyone else has a this problem and discovered a different cause for it.
Yes, Ned is correct. The original link to the image has been deleted.
@ Stubbed Toe, which version of Flash were you running? Did you rename the image, move folder with image inside, or rename folder?
Flash Authoring, QE
I am not quite sure what the exact problem is, but I think that the problem is that the image is too big when imported into the stage. Upon dragging the image in, Flash will need more RAM to process such an image. The only solution I've found is to reduce the size of the image, or to get a faster RAM card.