There are pros and cons to each way. Go here to read some knowledgeable opinions and thoughts: http://en.wikibooks.org/wiki/Programming:WebObjects/Web_Applications/Development/Database_vs_Filesystem
As far as changing the setting, this would change where the images are pulled from, meaning that you change the location and code to retrieve the images, therefore loosing the images from the first way of implementation.
Thanks for the reference. It looks like the the opinions are evenly split. The default setting
was database so I guess I'll leave it like that. I suggest adding this decision to the
initial setup wizard since you can't change your mind later.