To solve the “division by zero” crap, remove folders with no images in, or simply add an image. There is no function to say “if folder contains nothing, don’t do anything” so to speak.
On your admin panel nuder options, then PixGallery, you will find at the bottom a place to choose your folder for pictures and cached images. Change this to whatever but make sure you have them, if not, create them via FTP. It’s quite simple using a program like SmartFTP etc. Then add subfolders for different categories, or simply add photos to the photos folder. You do not need to touch the cache folder at all.
Final note: When using layers, if there is any other javascript which can overlap the image, it will appear on top. An example of this can be found here: No, I meant here really!. Just click the image, should show up the SPURL image on the right as it uses javascript