Is it still possible to create an image ad? And, are these ads in the text ad category? Here's the google page I'm referring to. https://support.google.com/adwords/answer/2991648?hl=en&ref_topic=3121943
Yes it is possible to create image ads based on templates. Now the button "Image Ad" has a wizard which scans your destination URL for images and picks a text from your previous ads to create the template, but you can customize everything in it.
"And, are these ads in the text ad category?"
No, image ads are different from text ads, they can be created in a campaign targeting the Display network.