Semantically speaking, it does not make sense to display your icon as a CSS background image. If the icon denotes something having to do with the item in that line, it should be displayed as an image. Otherwise, someone using a browser that does not display the image will see appropriate alternative text and will understand the significance of it being there. Ditto for printed pages (most browsers eliminate background images by default on print). If you want to change the icon site-wide later, just upload a new icon by that same name
The inline "kludge" you presented is, in fact, the proper way to go about what you're trying to do. Except for one thing - there's no such thing as </img>. If you're trying to close your image tag to be XHTML compliant, add a slash into the end of the opening tag, like so <img src="..." alt="..." />
Just a note to say thanks to you *all* for your speedy replies!
I shall have a go with each idea, and certainly check out that link for List Types - in the end i'll probably end up with what I started with (but at least I know its the right way to do it!! (thanks the_pm for explaining it!)