There's a fair bit of confusion going on here, so let's clear up a few things...

  1. IH2 works ONLY on product images.
  2. You upload your best quality image at the largest size you intend to display it (should never really be more than 750 px wide or 550px high - a lot of people still use 800x600 resolution monitors!) to the images directory, although you can upload to images/sub-directory if you wish.
  3. IH2 will then access this image and resize/optimise it on the fly for use as your thumbnail (the size used in the listings) or "medium" (the one on the product info page) images according to the dimensions set in admin > configuration > images. These on the fly images are stored in the bmz_cache.
  4. Using IH, you can not have a different picture for each size of image - if you want that, you must revert to the ZC default method of image management, where image.jpg, image_MED.jpg and image_LRG.jpg can be different pics.
  5. IH DOES allow you to have additional images - in fact, it makes it exceedingly easy. Simply go to admin > tools > Image Handler 2, select the product you want and add a new file. You don't need to worry about filename or the ZC image naming convention; IH does it for you.