Ah, yes, I believe the right click Materials menu is a Maya 4+ feature, sorry.

In that case, you'll have to create a material in the Hypershade (Windows > Hypershade, I believe. Windows > Rendering Editors > Hypershade for Maya 4+).

Create a new Lambert material. Open its Attributes by double clicking it. From there, the instructions are the same to assign an image file as a texture. To apply it to an object, you can middle click the material and drag it to the object in your view, or you can select the object, right click the material and choose, Apply Material to Selection.

Forgive me if I'm not exact, as I haven't worked in Maya 3.5 in a while.