One must do configuration change after you install. Open up the JCE admin area from Components and under configuration change the File Directory Path to your main images folder (take off "stories") so all your images are available when you try to insert something.
Support is lacking. Legitimate questions posted to their support forum get read but unanswered.
Even so I'll start over and give the 1.5 native version a try. I liked the first install that much.
From your review it sounds as if you tried to upgrade a JoomGallery 1.0 to the new JoomGallery 1.5 RC. We explicitly warned not to do so in the download and upgrade instructions. An upgrade will be possible once JoomGallery 1.5 (stable) is out.