I believe when God stated He made us in "His image", that the text meant in the image of goodness. Humans were good before Eve consumed a portion of the apple that allowed her and Adam to think sinfully.
That's the original context I got out of it as well, but a linguist of mine (who reinforced it from a book he'd read by a religious philosopher) asserted that given the historical context, the phrase is literally meant to mean that God made man in his image, meaning both physically && mentally (this usage of the word "man" referring to the male sex).
From what I've seen, the use of the word "man" to refer to the human race is an anomoly which exists only in the English language. In my mother tongue of Afrikaans, the word that translates to the English word "humanity" is the same as the English word for "mankind". The reference to the male sex equating to all of the human race isn't even present. The same exists in isiXhosa && Zulu, two other languages spoken in my country. Having lernt German in school, I've found the same thing to exist in that language as well.
Another example of this is present in the United States Declaration of Independence: "We hold these truths to be self evident that all men are created equal..." In historical context, this literally meant males only. White, Protestant, land-owning males, to be more specific.
It's only been recently that the word "man" in the English language has come to be similar to "humanity". That being said, if the linguists are to be believed, the original writers of Genesis literally meant that God made man (as in the male, Adam) in his image, in all respects.
(Women were just the upgraded version. =D)