Dear Peter,
You should disable the archive feature for your custom type and create a page called catalog instead. In this page you can place a normal taxonomy view that shows all the terms belonging to your taxonomy.
To add a featured image you will need to use something like "Taxonomy Images" plugin. Other users in the forum have been successful with this one:
http://wordpress.org/extend/plugins/taxonomy-images/
Please let me know if you are satisfied with my answer and if I can help you with any other questions you might have.
Regards,
Caridad