The padding of an image as it relates to the wrapping of the text is handled in the "Appearance" tab within the "Insert/edit image icon located on the WYSIWYG toolbar. First select the "Alignment" of the image in relation to the text (Top, Letf, Right, etc..). Next set the "Vertical space" and "Horizontal space" to 5 for each. By default these fields are empty (so no padding is applied).