1. Place the picture "In line with text,"
2. Add the caption in a separateparagraph,
3. And then wrap a frame around both of them;

This keeps them together

You'll find the Insert Frame command on the Developer tab: In the Controls group, click the Legacy Tools button, and then click Insert Frame (under "Legacy Forms").

The only tricky part about that is the difficulty of accessing the Frame command in Word 2007. If you have the Developer tab displayed, you can find it in the Legacy Forms palette. Once you know what it looks like (assuming you'll be using it a lot), your next step is to find it in the Customize dialog (you'll find it listed as Insert Horizontal Frame in the All Commands list) and add it to the QAT.