[alreadyregistered]

Here is the response that I got back (finally!) from XCart team:

"X-Cart 4.1.x handles images automatically. If the images are stored in the filesystem X-Cart will save them in the 'images/X' directory (where X -> C,D,T etc., depending on the image type).

So, if you want to select the images from the list (using the GUI interface) you should move those folders to the '<xcart_dir>/files' directory.
To change the images location (filesystem/database) you should go to the 'Administration' -> 'Images location' page."

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I did move my images folders to the files/master directory (../files/master/t_images; ../files/master/d_images) and they then were accessible through GUI.