I am attempting to upload my site for the first time. I can see all the text, but none of the graphics are visible. When I contacted my service provider, he said I am uploading my files into subfolders named by my domain, and I need to be loading them directly to the server.

How do I set up VSD to ensure this happens?

YNWA

If you could provide alittle more info it would help.
who are you hosting with if I may ask.
Usually or in most cases if you can see your text then you may have named your images with seperated words, some servers don't like it so to fix this they ask that you use single word names. without and specific link to look at I can only guess. VSD holds all your images for your website in a folder called "files" this is uploaded along with anything else you may have added.
IN the www slot of your ftp connection in VSD you should either have it blank, or a / or public_html or www you can check this under the settings tab>FTP Settings

Please let us know.