Making a library...
I read the documentation, but I am still struggling with this. If I want to make a background for a room, where should I save the jpg file? If I want to make flash swf's for items or characters, where should I save the swf files? This is what I am looking at (below). Do I need a "library" folder somewhere? I would appreciate any help getting started. Thanks! :)

Lassie Director works differently to AS, it doesn't use a library folder. all the assets are stored within the CST file (found in the "projects" folder BUT it is good practice to create one and store your images you create inside it, then import the images into editor from there, inside it make a folder for each room, it can save a lot of confusion as the game gets bigger Its been ages since i used director so i could be slightly wrong

Director or AS?
Would you recommend I use AS? I have several years experience with Flash and would say at an intermediate Actionscript level. I haven't really started a project yet, so it isn't too late to switch. As a beginner, would I be more comfortable to Director or AS? Thanks for the quick reply!

Import into editor....
I am stuck at the part where I import things like images and flash animations into the editor.

Concerning AS versus Director... I don't think it makes that much difference which one you go with. They're both at a similar level of learning curve. The editors are virtually identical (they SHOULD be, given that they stem from the same application!). To import things into the editor, go to "Config" on the main screen, then into the "library" editor (I think those are the correct editor titles... it's been a while!). Once in the Library editor, you can browse for files to import into the project cast. Those assets will then be available in the room layout editor.