Yeah I'd say the picture is a little bit of a throw off. that entire chain off the phenyl group (or cyclohexane I can't see the picture while I write this) is free to rotate. As with temp dependant reactions, it could rotate around so the methyl group is almost near the ring, almost in it's final product position.
I'd agree and say that protonation of the alcohol (or at least leaving of the alcohol) as water is a key step, and that the double bond in the functional group chain reacts with the carbon bonded Alpha to the carbonyl and attached to the hydroxyl group. I wish there were an easy program to draw out mechanisms with...words don't do them justice