Grayed out is good-- it means it's already the System Library.
When I open my Pictures files, I have my Photos Library (actually, several of them), a folder for Photo Booth, and some other folders I made to use for other picture purposes. I don't have jpeg files (outside of those folders I mentioned.) All the pictures that the Photos app uses are inside the Photos Library package, so I'm not sure why you have loose pictures floating around. It shouldn't cause a problem, though.
Try these things:
- Restart the computer (of course)
- Re-start in Safe Mode. This bypasses certain potentially disruptive processes. Safe Mode is different for different computers, so see this:
Start up your Mac in safe mode - Apple Support
- Rebuild your Photos Library--close Photos and re-launch by option-command-clicking the app icon.
- Make a new user and see if the same problem recurs with it
- Use another library if you have one, or make a small test Library with a few pictures in it and see if the same thing happens. You can create a new Library by closing Photos and then option-clicking on the Photos icon.
The idea is to find out if the problem is with the Library, with your account, or with caches and login items, and stuff like that. One of these steps may fix the problem, but their failure to work also helps figure out what's happening.
And by the way, you haven't used any of those Mac Cleaner apps, have you? They are not safe, and can cause problems like you report.
