Adding photos to iTunes library; synching to iTouch

How do I add photos to my iTunes library? I have used the "File, add folder to library", but when I then select the folder of photos and click add, it appears as though nothing happens...under "Library", photos does not appear with Apps, Podcasts, etc.

With my iTouch connected, and I select "photos" I get the screen "synch photos from", along with a drop down menu.

But there is nothing there; if I synch with "all folders" selected, the existing photos on the iTouch are deleted, and the folder I selected is added instead.

There is plenty of memory on the iTouch.

Thanks for the help.