Maybe it got accidentally deleted? On the left...under where it says Folder List, there should be a folder named C:\My Documents\My Webs...., then under that there should be a folder named _private. They will look like manilla folders. There should be one named images, that looks just like _private.
If it's not there, you can make a new one.
Right click C:\My Documents\My Webs.... > New folder > name it images
Drag all your .jpgs into that folder.
While you're doing all that, make sure none of your file names have spaces and that they are in lower case letters.
Sandy
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Stu Reilly Design
Allegheny Web
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