My instructions pages needs to include a few separate paragraphs of text; I can't seem to find any documentation that shows how to create separate paragraphs. Is this possible?
Yes. Simple paragraphs are possible as illustrated in the examples for the <page> element in the documentation.
Alternatively, how do I embed an image into the <page> such that I could upload an image file with my instructions instead?
You cannot embed images in <page> elements. You either need to use <htmlpage> or display your instructions via standard <text>, <picture> and <trial> elements.