When you use the "New Dir" button to change the default image directory, the Change Image Directory appears. When you type in the New Directory name (vs. using the "..." browse button) the program fails to check if a trailing back-slash was entered and append one if it is not found. This results in an invalid directory name.
I was also wondering why a file open dialog was used to change the directory rather than a directory dialog. When the file open dialog appears, there is no indication of the current directory name you are in, which means you have to use the directory search tools anyway.
Thanks for pointing that out Larry. I don't know for sure why the file dialog was used but I suspect it was because it lets you view the images where the directory browser doesn't. It does mean you have to select a file which is a bit unusual.