The old 'image directory' made use of Moodle 1.9's way of storing files (now called legacy files). You no longer do that from the add/edit screen you've screen shot there. Go ahead and save/add the resource. Once you click on it to view it, you'll see on the view page a link to "Add images".
Clicking that allows you to then upload a file. Either a single image or a zip file full of images. These are then added into the gallery. (When I get time one day, I'll update that file selector to allow you to upload multiple images without needing to zip them up...)
I hope that covers it for you