I've looked through the manual and the forums and haven't found anything definitive, so I'm going to ask.
 
I have a store that has several secondary/sub-categories that I want to show in a neat, three across layout.
 
I've uploaded the individual images to each respective category.
 
Now, do I need to create a 'custom block' to do this? Or do I create a custom layout as shown here?
 
http://www.viart.com/img/custom_layout.jpg
 
Or is there something really, really simple that I am overlooking that will get this done?
 
Thanks in advance for any assistance!

I have subcategories showing with a short decription, 2 per row (but you can change that) by changing the Products > Categories List block settings at CMS > Pages Layout > Products Listing Page. You can set Categories Type View, # of columns, and type of category image.
 
Hope this helps!
 

One of the issues is that you're using a really old version here.