Forms Experience Builder can not upload images during design time.
This technote describes how to rectify an image upload issue when using Forms Experience Builder.
FEB will not successfully upload images to the application designer.
The WAS Admin password in the builder_config.properties file contained a bad password character, hash (#).
Resolving the problem
To resolve this issue you must change your WAS Admin password in the WAS Admin console with a password with no special characters and then update the properties file with it.
In this case the hash in the properties file is infact used as a method to comment text so only the portion of the password before the hash was being used by FEB.