Juliet -

All you need to do for an image based menu is to name the images like catimg23.gif or catimg5_17.gif (using the cPath of the category for the numbers) and save them in /includes/templates/your_template/images/.

Make the images the exact pixel size you want them to display at.
You can find the cPath for each category by bringing it up onscreen and looking at the address bar at the top of the window. The URL will include ...&cPath=5_17&... for category 5_17. (If you have an SEO mod installed it will be different.)