Thanks for the clarification. When handling bug reports, it is important that we understand exactly what happened. In our parlance, a "crash" means that the software goes down in flames. If makes a difference if the processing graph stops because of an internal error. Furthermore, it is important to know the exact steps you took so that we can reproduce the bug. Since you were posting this on the Application Builder forum, I thought this applied to it only.
We agree that the stepping feature in the Builder needs to be improved, and we are working on that. When it comes to watching folder contents while running the app in the Engine, we need more details about the configuration of the virtual camera. Can you post a screenshot of camera settings in the camera configurator? This feature is automatically tested and we believe it works in general.
The triggerTimeout parameter has no effect on this. If you are triggering the image source with another tool, the camera will be put to software trigger mode and folder watching won't work. Maybe you haven't changed the default frame rate of the virtual camera? If the frame rate is non-zero, the virtual camera will loop though images that exist in the folder at start-up.
Edit: Actually, new images will be added to the loop, but if the folder is empty at start-up, no images can be found and the first timed trigger fails, causing a run-time error.
To change the default frame rate, open the virtual camera in the camera configurator and change the frame rate to zero. Then save the settings and assign the saved parameter set to the camera.