The FolderGalleries folder is the only folder that can be used by this feature the other folders are for the other image gallery.
Click the edit link for the folder gallery and then try clicking the save button even if it looks already correct.
The lowest folder that can be the root of the folder gallery is the FolderGalleries folder as shown in your post. However you can make the root a folder beneath that folder at any depth level. Doing so excludes files from the upper folders.
Hope it helps,
Joe