I am attaching an MVC solution where you can find a Kendo UI Editor implementation with configured ImageBrowser. With it, the image upload and insertion in the Editor content works as expected.
Please refer to the ImageBrowserController in the above project and verify that a check is performed for initially creating the images folder in the CopyFolder method:
The above will force the images folder to be created the first time that an image file is uploaded. After this, the files should be properly uploaded to the specified folder.
I hope this helps you to resolve the issue. In case you have any other questions, please let me know.