Image galleries were added as a sort of pre-stage - place your jpg files outside of the stage0 - stage2 folders in the corresponding gallery folder (default but not necessarily only folder: photos). wombat generates web-suitable and thumbnail versions of them and places them inside stage0.
stage0 is where you edit your ordinary pages or formerly created blog pages (default but not necessarily only folder: blog). stage1 is created for internal reasons only, stage2 contains the files you upload to a suitable server, possibly via rsync to keep traffic low.