When doing iPhone or iPad development sometimes there is a need to do processing on photos in the iPhone photo library. Instead of just testing the app on the device there is an easier way.
You can create a photo library on the computer that shows up in the simulator. The path to the simulator photo library is:
~/Library/Application Support/iPhone Simulator/5.0/Media/DCIM/100APPLE
If the directory structure is not there create it and add your photos / videos in there.
To have them show up in the simulator delete
~/Library/Application Support/iPhone Simulator/5.0/Media/PhoneData. This will rebuild the iPhone photo database and allow you to use those items during development.
That is what i do. Good luck.