In Deuteronomy 5, Moses is restating the ten commandments to Israel, and the quote you mentioned is only part of the second commandment. But it has to be taken in context:
Quoting Deuteronomy 5:
Verse 6: I am the LORD thy God, which brought thee out of the land of Egypt, from the house of bondage.
Verse 7: Thou shalt have none other gods before me.
Verse 8: Thou shalt not make thee any graven image, or any likeness of any thing that is in heaven above, or that is in the earth beneath, or that is in the waters beneath the earth:
Verse 9: Thou shalt not bow down thyself unto them, nor serve them...
Verses 6 & 7 state the first commandment, and verses 8 & 9 together are the second commandment. They can be summarized as: "I am God; you shall have no other gods; you shall not worship idols, treating them as gods." From the context, it’s clear that image/likeness refers specifically to their use as idols, and in fact some translations and commentaries use the word "idol" instead of "image." In either case, the context makes it clear that what is forbidden is not the image itself, but the worship of that item. We tend to draw a distinction because to us the word "image" means a photograph or a drawing, but in the Bible, it usually means an idol.
The larger context is that the Israelites, like other contemporary races of people, were very prone to worshipping physical idols as gods. It was a common practice, and the God of Israel explicitly told his people to avoid and condemn it.
So I don’t think there is anything wrong with having a drawing of Jesus, nor with a depiction of him i.e. on the cross. But I do think it’s possible to abuse those things, and I think the Catholic church (and many Catholics) could be considered idolaters with the way they pray to dead people, seem to worship statues, they wear crosses and scapulars believing that it protects them somehow, their priests bow down before their "Eucharist" sacrament, their priests kiss their crosses and their books, etc.
