I had the same problem and its because I clicked on the "Clear iPhone Cache and Content" but it seems to get rid of everything,
all you need to do is just re install the whole of xcode again, you don't need to uninstall first just install over previous and the images will be back on the iPhone simulator.
the good thing as well is that you dont loose any of your xcode settings.
That will put them in the photo album. You do not see thumbnails though. I haven't figured that out.. I was told make copies and name them THM file types but i didn't get it to work.. but its better then re-installing.
Yep, just drag any image from any where in your mac, into the iphone sim screen. that'll open up the safari inside the simulator. then you click and hold on the image, a actionsheet will pop up and select Save Image. you're done.
for me, i always backup the images, which is under ~/Library/Application Support/iPhone Simulator/User/Media/DCIM/100APPLE to another folder. So when I do a Reset Settings for iphone sim, i then just copy it back to that place.
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Dragging photos into the simulator is OK if you have just one or two. If you need to import more then check out this article. It describes how to do a bulk import of photos with correct generation of thumbnails and updating of the photos database. It works on all versions of the simulator including 4.x.