Is it possible to create a library of clipart, backgrounds, patterns etc, for the client to add into their own designs?

Yes. That feature is called fancy designs. It lets you upload any number of image files (.png, .jpg, .svg) and show them on the front-end for your customers to choose from. http://support.fancyproductdesigner.com/solution/articles/13000006551-designs

OK, great.

I was wondering what that Design feature was!!

Using the label editor, I have changed this to 'Add Graphics' as I feel this is a better description.  I thought it was to add a different template design!!!