You're not seeing all images. What happened is you have two users, LazyMan and Acid_Rain, who didn't put images into a category. Since they don't have a category they're kind of like global images and show no matter what category you have selected.
1) Is there a way to require that uploaded pictures go into a category?
2) is there a way to manage photo's in the system besides going to each individual image. Like with the forum, you can select multiple posts and perform actions.
Not really on either of those. I turned the thread into a feature request so I can keep track. I'll try to fit this into the next version. If not 1.1 then 1.2.