Never mind, I figured out how to fix it. To anyone else with the same confusion:
When you are arranging the text box and the photo, both objects will be in floating mode. Go ahead and make the text box 0.23 in. high, even if the text gets obscured away.
Then position the text box and photo together (taking note of alignment guides), and then select both objects and Arrange>Group.
Now you can change the entire picture-and-caption module into inline mode, and suddenly the caption text reappears. Note that in inline mode you cannot ungroup the two objects (go back to floating mode for that).
Sorry if my obsession for details makes this seem like an extremely odd post, but I'm sure there's someone else out there.
There is an easier way.
Select the photo, here represented by the green square.
Click the Wrap control in the format bar (indicated by red oval).
Choose the last item in the menu that appears.
This turns off the Text wrap property for the object (photo), allowing the text box to snuggle up against the photo/object without pushing the text away.