Yes, that is correct - if you have a key-pad image (originally it was a key pad but in the meantime is used as a general board image for I/O visualisation) it needs to be bundled in the directory that you state. By distributing a zipped image of the directories and files it can be unzipped and executed.
If you want to distribute with a flash image (eg. a file system for web pages etc.) also the flash_xxx.ini can be included so that it loads the internal (or SPi flash, or SD card or memory stick etc.) image when it starts.
The idea is that you can send the project (simulation of "product") so that your customer can test its operation even when the HW is not yet ready - this allows finding deviations from the spec at an early state and have these corrected and verified asap. It allows front panel and LCD control, various peripherals and networking to be included and test sequences (injecting data on ports or interfaces, for example) to exercise standard operating sequences.
It is one of the main features of the uTasker project but one that is not always given that much attention since many people dismiss simulation as not useful because they are more interested in seeing things running on the HW. But it allows great savings in development time and much more accurate/tested implementations if used as intended.
I am pleased you found it useful.
Regards
Mark