Hi Mortanius,
I am aware of this icon, and I must admit that as a devout "new" Orthodox convert, I am somewhat troubled by it, in light of what you have so ably pointed out.
I can not answer you immediatly on thos particular issue. I will first have to get more input of this myself. That being said, I follow the ruling of the 7th Ecumenical Council which I am sure you are aware of, which was convened to discuss the validity of venerations of icons depicting the Saints, Theotokos and the Trinity in it's tratitional pose of the Three Angels, or the Baptism of the Christ.
I can not speak for the Catholic Church, as I am not a member, and have never been. As far as Orthodox belief goes, we do not necessarily ascribe any special virtue or power to a particular Saint. But, on that subject, recorded miracles HAVE occurred while believers had been praying before an icon, and that particular icon then does become the focus of special veneration, but NOT worship. (Which as you pointed out, is idolatory)
You have stated correctly, and you yourself appear to believe, that those upright members of our faith who are now with the Lord are not dead. And because of that, they are considered to be members of the Church still - only they are now in what we term the Church Triumphant, while we are still in the Church Militant.
Because they are still our Brothers and Sisters, they still care deeply for us, therefore we request them (Legal term "pray them") to petition our Lord for Mercy, much the same as we would request such from a fellow member of our earthly parish/congregation.
To an outsider (Protestant) veneration of icons may look like worship, but it is not. There is only a reverantial acknowledgement that they have fought the struggle before us , and have overcome. We are all made in the image of God, therefore we venerate that image not only in icons, but in one another.
That is an instruction of our Lord, His new commandment - To Love one another, as He has loved us.