I also confused about 'why I can't put this custom sprites?' like you. But recently I figured by someone's advice. To use the custom sprites, you have to drag the custom images into the folder, which means 'put the image sets'.
For example, if you want Penelope sprite for sally, go to 'Penelope folder', then copy or extract the whole set of the image(files) from the folder. Then put on 'Sally folder' like this current screen you're showing.
To cut in short, don't just leave the folders. GET THEM OUT.
And for just in case(you would already knew though),
1. Only using one set for one character will work.
2. In the game, you have to turn on the 'custom sprites on'.
3. If you want to change the custom sprites you're using now, put them back to their own folder, then change the sets or leave it to play as their default character.