Images and other files go to /var/lib/drupal6/files. That makes sense according to Debian/Ubuntu packaging conventions which follow the Filesystem Hierarchy Standard.
Note that TurnKey uses the standard Debian/Ubuntu installation of Drupal, which may be different than the from-source installation procedure you are used to. Other then that the only major difference is that we bundle a bunch of generically useful modules with Drupal.
Speaking of modules, in the next version we plan on bundling IMCE which makes uploading images much much easier as you can see in this screencast.
How to upload images
Note that TurnKey uses the standard Debian/Ubuntu installation of Drupal, which may be different than the from-source installation procedure you are used to. Other then that the only major difference is that we bundle a bunch of generically useful modules with Drupal.
Speaking of modules, in the next version we plan on bundling IMCE which makes uploading images much much easier as you can see in this screencast.