1. How can I specify my own image for an album instead of the generic folder, loudspeaker etc. ones?
Album cover can be set to one of the media items in the album. If you want a custom photo for the album cover it works just like Facebook and many other gallery usages in that regard. Meaning upload a photo to that album then set it to be the cover.
2. How do I specify the visibility of albums e.g. public, invite only etc.
You can't at this time. Privacy can only control the entire gallery at this time using CB Privacy. After CB Activity 4.0.0 and GJ 4.0.0 I will be working on a major CB Privacy rewrite that'll allow refined privacy controls inside of other plugins.