1) many of the files in the webassist/kfm folder have become corrupted during the upload, the code on a lot of the files in that directory has become double spaced. this is causing the image thumbnail problem.
try using a 3rd party ftp program like file zilla to preform the upload to prevent this from happening
2) in the kfm configuration file, the user file path:
$kfm_userfiles_address = '../../photos';
was missing the trailing slash:
$kfm_userfiles_address = '../../photos/';
3) see the description for 1, it;s the same problem.
4) you see 2 folders named photos because there are 2 folders named photos. there is a photos subdirectory in the photos folder.
use security assist to create admin login. In webassist -> forms -> HTML Editor -> Site settings dialog, you can set the security assist user that has access to the file manager.