I’m not quite sure why your template changes aren’t taking — it looks like you’re doing what you should. If you’d like to fix the problem via CSS, adding these rules to your styles.css file would make that page look nice:
.lcp_catlist li {
margin: 0;
list-style: none;
}
.lcp_catlist li img {
margin: 5px 10px;
float: left;
}