Since updating to the latest version of WordPress I cannot click on the Visual tab or insert photos. I tried switching from Asteroid to another theme and the problem went away.
You just need to clear your browser cache.
Also, the dialog box says all customization will be lost if I update. Does that mean everything such as background, layout, etc?
If you directly edited the themes file without using a child-theme then yes those file will be replaced.
I don’t think you would be affected though, you don’t seem to have any modifications.(rotary club, right?)
Background image wont be replaced during an update.