Comment 2 for bug 972712

The custom widget in 2 is designed to interrogate libvirt about media pools you have configured. It is mainly used when connecting to a remote libvirt instance on another machine, since presumably that may be where your media is located.

You can either use the Browse Local button, or you can configure your iso directory as a storage pool by selection Edit/Connection Details at the main window, creating a new pool with the + button, and adding your iso directory.

I agree it's pretty cumbersome.