Here there is a note saying "When you upload your design files, you should keep all files that are related to a single design in their own folder in the Master Page Gallery. When you copy your design folder into the mapped network drive, the Master Page Gallery retains whatever folder structure you created."
What do they mean keeping in own folder in Master Page Gallery? All my design related files are in a single folder containing sub folders of images, css, js.. I copy this top folder to the http://ou.domain/_catalogs/masterpage/
This is also where I would copy my html file to first before converting to master file?