IH2 will not move images from "images/original" to "images" unless you allow it to. Don't do it as It doesn't work right.
I manually use ftp to move them.
From what I can work out IH2 resizes the images in the "images" directory and caches them in the bmz* directories.
It will also resize & cache the medium & large images providing you don't already have medium & large images in the "medium" & "large" directories.
If you have you will have to delete them (I saved them to a different directory, just in case) before IH2 will create & cache them.
This part is logical really as it allows you to use a different image for the med & lge images
Clearing the cache does exactly that, it deletes all the cached images, forcing them to be recreated next time they are accessed. You need to this if you are playing with the image sizes as IH2 creates unique names for each image size and you will end up with lots of different size images that need to be cleaned out.
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