I finally figured this one out. I took the following two steps to make this work for me:
Added an alias in the httpd-vhosts.conf file as shown below (without the quotes). For a non-virtual host situation you add it to the httpd.conf file.
'Alias /ashortname "/path/to/external/physical/directory"
Allow from all
You could limit the "all" permission if you like. The path to the external physical dirctory based on my directory structure
above would be "C:/vhosts/sitename/imagestore" on my Windows PC.
In the view file ...which in my case is display.phtml I added (without the quotes):
'<object width="400" height="400" type="image/jpeg" data='/ashortname/myimage.jpg'>
I used the alias to find the image file to display via the object tag.
That was it. This fixed the problem of displaying an image from a directory outside the site document root.
Let me know if you have comments or other suggestions.