So this tool actually create new adt files from your heightmap image. I'd recommend to use images with scale like (256*adt count in a row)+1 f.e.: if we have 1 adt then picture size will be 257, if we have 2x2 adts then image size will be 513 etc etc. But you must understand that firstly you need to get your image in regular size and then just increase canvas size in photoshop for 1 pixel. BTW this tool can have bugs with creating adts below 20_20 at the grid. I didn't get any messages from author till september and author wasn't online till november so I can't ask him about anything.
Your image must be named as image.png and it must be placed in the same directory as FractalWoW