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The difference between <p> and <div> depends on the rest of the stylesheet and the default styles applied by the reader. Usually, <p> will have some default margins and/or indent, while <div> is a "virgin" element. By default, I would prefer <div>, and, to be specific use "div.image" in the CSS rather than just ".image".
"text-align" simply defines the alignment of the content, whatever it is.
"auto" margins can be used for different purposes (centering a table, usually), but they are not guaranteed to work (the spec allows ignoring them, and many readers do).
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