Hi willfull3,
I'm having getting an accurate impression of what you are doing based on your description, so I can't really tell you exactly what you are doing wrong. However, it is not necessary to create a folder to add an image to an auction, nor is it necessary to upload that image twice.
If you are looking to add an image to your listing that you have already uploaded into your Auctiva account, you will first want to click one of the "Select an Image" boxes on the listing creation page. In the ensuing pop-up window labeled "Select Images", you will then want to click the image with your cursor (a number will appear on it when you do) and then click the "Done" button.
Once you have completed that process, the image will be placed in the "Select an Image" box on the listing creation page and should appear in your listing preview if you choose to preview the listing.
If you wish to add an image to a listing that is on your computer, you will still want to click one of the "Select an Image" boxes, but you will then want to click the blue "Upload" button on the pop-up window labeled "Select Images". Once you add the desired images to the "Drag and Drop files to upload..." area at the bottom, just click the "Upload" button.
The images will then be uploaded into your Auctiva account and will be placed in the appropriate "Select an Image" boxes on the listing creation page. They will then appear in the preview if you choose to preview the listing.
If you have any further trouble with this procedure, I recommend contacting our customer support team using the web form on the following page of our site:
http://www.auctiva.com/help/requesthelp.aspx-Mike