Picture not showing up properly after uploaded to folder. I see an icon only.

I inserted the CKEditor into a page with image upload to a designated folder. The uploaded images would be inserted into the HTML editor. Unfortunately, I encountered the following problems:

1. The uploaded images do not appear at all when I browsed the folder. I can only see a grey box above the file name.
2. When I inserted an image, I see a red box with a cross. Strangely, 1 or 2 images appeared properly. I wonder why.
3. When I previewed the uploaded images, I can only see an image icon in the lightbox.
4. The target upload folder is "photos". But why do I see 2 folders by the same name whereby one is set as the root folder and another a sub-folder?
5. Where can I set the permission to allow only authorised person to access the upload folder? Do I need to create a database listing of authenticated users with login id and password?

See attached image for screencaps.