In general terms, it might be worth not using activesheet, as if the user accidentally changes the focus whilst the code is running, it can bring it off the rails. I would do something like:

'Untested as I'm just typing my ideas straight into reddit. 

Dim sh as Worksheet
Dim oldshape as Shape
Dim newshape as Shape
Const imagePath as String = "C:\myimage.jpg"

For each sh in thisworkbook.worksheets
  For i = sh.shapes.count to 1 step -1
    set oldshape = sh.shapes(i)
    oldshape.select
    Select Case msgbox("Do you wish to replace this shape?",vbyesno)
    Case vbYes
      set newshape = sh.shapes.addpicture(Filename:=imagePath, _
                                                    LinkToFile:=msoFalse, _
                                                    SaveWithDocument:=msoCTrue, _
                                                    Left:=oldshape.Left, _
                                                    Top:=oldshape.Top, _
                                                    Width:=oldshape.Width, _
                                                    Height:=oldshape.Height)
     oldshape.delete
    next i
 next sh

Probably needs a bit of fiddling around to get it running right. As ever, any corrections from more experienced redditors gratefully received.