I would like to style the -- Address, Pre formatted and Headings(1,2,3,4..) -- that are listed in the drop down menu that lives in the page/post text and media configuration tool bar.

Should I add a CSS insert in the theme options.

And if so could you please provide an example.

Thank you.

"Media configuration toolbar"... Do you mean the Wordpress admin area? There's nothing in Atahualpa to style the WP admin area

If you meant the Atahualpa front end, add a CSS Insert such as

h1 { font-size: 2.5em; font-weight: bold }
h2 { font-size: 2.2em; font-weight: bold }
...