Oh, I first tried Texture_Coord with UV mapping and it did not work. I tried XY mapping because I ran out of other things to try.

I hate to be obvious but your texture isn't plugged into any nodes as far as I can see. If you plug it into diffuse color, for example, you should see a difference.

So I understand what I am doing, what is the concept behind nodes and plugging them in. I am used to just applying an image and bump map in Bryce to an object and then adjusting things in the various 2D and 3D texture editors. Why should I plug into any one "outlet" (like "diffuse color")?

It works! Thanks! But I am still hazy about the concept behind the plugs.

If you don't plug it in, it's not going to show as a texture. You might just try plugging in the texture into different nodes and see what the result...that would probably give you a better idea of what happens with the various nodes. There are some good tutorials on nodes at Runtime DNA and Curiosity Labs by Traveler that show some of the wide range of effects that can be obtained by using the nodes and their various settings.

I just ran into an even more puzzling problem. I successfully rendered the cloth and went back to the Materials room. The Object was cloth-plane and image assigned to it was the correct one. But images in the Materials room do not reflect the image map as before. I just rendered it and it renders fine. When I click on texture source it says none even though the correct file name is there. It this a bug?

Are you sure you had Material set to the right object? There can be multiple objects and you often have to select each part and apply the texture you want to it. In the example you show above, the Material is set to Preview.