If I have my graphic as "In line with text" layout, the caption inserts ,as text, beautifully right under the graphic - just as I want. The cross-reference hyperlink goes directly to the caption. If I change my graphic to "square text wrapping" layout, the caption gets inserted in a text box. The cross-reference hyperlink goes to the caption, but the dotted text-box outline that the caption is in is also displayed - as if it was waiting to be edited. I want the square text wrapping and the cross-reference to go to caption without displaying the text-box that the caption is in. I may have a setting wrong?

That's because you had the picture selected when inserting the caption. For Word to align the caption with the picture, it has to put the caption in a textbox. If you didn't have the picture selected, the caption would be inserted just the same as for an in-line picture - but then you might have issues getting the alignment & association of the two correct.

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Cheers,
Paul Edstein
[Fmr MS MVP - Word]