@irishocaruso
Please be aware that there are different flavors of WordPress. Lots of information one finds online or hears about will be related to wp.ORG rather than to wp.COM.
http://en.support.wordpress.com/com-vs-org/
You can use categories to organize your posts, as you have done.
As far as I know there is no way to have pictures automatically next to post titles or in custom menus on wp.com.
If you want to list your posts in order (like chapters) then you could use a custom menu widget in your sidebar with links to posts in the order you would like them to be read.
http://en.support.wordpress.com/widgets/custom-menu-widget/
(for that matter you could put a custom menu in your top navigation)
more detail about custom menus:
http://wpbtips.wordpress.com/2011/12/19/custom-menus/
If you want pictures with the links to posts you will have to venture into a bit of html/text editing. If you are interested in that we can help.