I know I need to replace the cartridge but i don't know where it is located.
This is what my system looks like:http://i.imgur.com/5Cu89.jpg
The middle knob is what switches where the water goes. Now do I need to replace that or the actual faucet?
You need to replace the cartridge in the middle handle.
Now, I am pretty inept when it comes to DIY so my next question is, how do I get the handle off the wall? Is there a de-caulker I have to buy or something?
You will be able to take the middle stem out and check the seats, & washers which to me sounds more like a washer then the stem its self it looks like a older system I don't know if you will be able to get the parts.
This might helphttp://www.acehardware.com/info/index.jsp?categoryId=1280424