Thanks Hilary, it appears that you are correct, that file attachment option is (according to the below link) enabled for a custom web service not SP. All it basically does is send the attachment to a seperate document library and store the link to the attachment in the column that the other information from the form was sent to.
http://social.msdn.microsoft.com/Forums/es-ES/sharepointinfopath/thread/f2b78cee-4a47-4d05-b3af-60b376718717
Basically I had done a reverse of the above before, loading attachments in a document library, then having people link to the attachment and include in the form before they send it out, so that those who receive the report could click on the link to open the attachment.
Looks like I will have to keep doing it that way.