You are mostly right. In itself the <h1> tag does not point to the pic, but to the position of the tag at the top of the document. The tag is there, although it is not displayed. The big difference between 'display: hidden' and 'display: none' is that with hidden the tag is also not visible, but space is reserved for it with margins and all. So, by using 'display: none' the tag is there but is not taking up any space.
If you do not want to use the <h1> tag, that is also possible of course. You can also add a manual a link to the cover in the NCX. It depends on what you want of course and manual additions will be removed if the TOC is auto-generated.
You could also use '<h1 class="hidden" title="Cover" />' instead of '<h1 class="hidden">Cover</h1>'. That would also work.
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