'New Image' in FolderWorklow is broken

1> Login, go to browse perspective, select 'content' folder
2> In dopdown listbox above document listing select 'New Image'

=> Dialog with one input textfield, enter 'test', press OK
==> javax.jcr.ItemExistsException: /content/Image/Image/hippogallery:thumbnail

Questions:
1> What is this 'New Image' dialog supposed to do? Shouldn't this be the upload image dialog?
2> Shouldn't this workflow only be active on a folder of type hippogallery:stdImageGallery?