Tony, I am glad you found a glitch in your process. I think you learned to store your images (take care that file name of the image doesn't start with number) in project /images folder instead in templates.
Manual reference:
"In your project folder you see two folders: images and videos. There you should store the images you want to use in your projects in advance. I have pre-installed 3 images and 3 video files as examples to get you started (actually 5 video files...more about that later)."
&
Details on the plugin code structure:
Folders
/images - This is the folder where you store your pop up images in jpg format. Keep in mind not
to use too large files to have faster load when online. 2000px wide at 120dpi is fine.
3 images I stored in /images folder from templates I placed there as help for you later on when project is created with droplets to be easier to understand where to place your own project images. That maybe introduces some confusion on your side, but at the end hope you didn't loose to much time figuring it out.