The libraries shown in the ImageMnager dialog are controlled by the ImagesPaths collection.
Here is some information on how the ImagesPaths collection works.
By default, all the libraries from the current site are included in the ImagePaths collection.
When you set path starting without slash (e.g. "ImagesLibrary"), you will refer a local library - library from the current Web. If you set path staring with slash (e.g. /ImagesLibrary), you will refer a library from the SiteCollection (root).
Lets open the SubSite1 ConfigFile.xml and set the following images path:
The ImageManager will load the SiteCollection/SubSite1
If you set the path with slash the ImageManager will open the SiteCollection
Also you should know that if you set e library such as SiteCollection/SubSite1
/ImagesLibrary, the currently logged user should have at least reading rights for all site collections of the path. Otherwise the ImagesLibrary will not appear in the ImageMangager dialogue.
I hope this helps.
the Telerik team