If you are testing directly in Flash, the path from the .swf to the images would simply be:
no folders, no nothing... they are in the same folder (according to what you said).
While that path will work fine from testing, it WILL NOT WORK once you place that .swf on a Web page in a different folder.
Then you must path from the .swf to the images as though the .swf is in the same folder as the Web page... not it's actual, physical location.
Once the .swf is places on the Web page, the path from the .swf to the images would be:
Once correctly pathed relative to the Web page and not it's physical location, clicking directly on the .swf in the images folder WILL NOT WORK! And that's not a bad thing... it simply means that the .swf was created to work from the Web page and not in the "images" folder.
Also do not use "machine" relative paths such as
doing so will be nothing but trouble once you upload your website to a sever, since none of that path exists on the server.
I had the same problem recently. Using your finder window find what the EXACT path to photo1.jpg is and make sure it is exactly the same as the the path you input for the UI Loader source. That will take care of it when you preview it. When you post it to the web you need to make sure you're asetts can be found.
If you have a folder actually called index.swf that will really mess you up. Check for a typo in your source.