I've created a Survey123 Connect form from an existing feature layer. I had to add a signature field to that feature layer. When I created the report for the survey, the signature just shows up as the file name. I have looked at the Report Quick Reference and it indicates the field will return a text value and not an image.
To test outside of all my form mechanics, I created a new form from the feature layer and only changed the signature field to "image" and "signature", and then published it. The sample report shows only a filename and the Quick Reference for this new report only shows the signature field will return a text value. This makes me think it has to do with the field definition in the feature layer.
I'm really confused about the connection of images to Arc On-line. We have another feature layer that has images and when I look at the fields for that layer I see a column for "Photos and Attachments" which is a type "Attachment". One would think that a survey123 field would be specified with the same data type, but that isn't an option when you create a field in the feature layer.