Jayjay's right, just drag in the file from windows to the layout and it will create a sprite. That's probably the easiest way.
We're still in alpha and doing all the coding so I'm afraid there aren't any docs yet - we've got plans to come up with docs soon though. C2 relies on external editors because we haven't finished the built in editor yet (see the FAQ).
I'm guessing what happens is:
- C2 opens Paint to edit a temporary file (this is how it's done at the moment),
- you click Open,
- Paint loads a different file,
- you click save and Paint re-saves the file you opened, not the temporary file so the temporary file is left empty,
- you close paint and click OK and C2 loads the blank temporary file.
Another workaround might be to open a different instance of Paint, and copy-paste the image in to the Paint that C2 launched. The same thing might be easier (and also lets you use alpha) if you install Paint.NET