I want to clarify these answers, it's all there, but it's too confusing: You must create an images folder in the project. In most of my projects, I would create an assets folder, and then a subfolder of images. This won't work, must be a top level images folder.
Additionally, if you start your project in VS code. You have to start the project in Android Studio. You can always just start a new project, do your icon work and copy the folders over to your actual project.
But TWO things seem to interfere: If you don't have an images folder and if you did anything in VS code. I was guilty of both, and had to unwind both issues.
Start a new project in Android Studio
Create an images folder.
Add it to your pubspec.yaml in assets: Mine would look like this:
assets:
- assets/images/
- assets/sounds/
- assets/
- images/
Now you'll be able to right click on the res folder and see new image asset.
Do your icon work.
Copy the res folder over to your actual project.
Want to iterate: I put an image in the top level images folder, but I don't think it even needs that. It is looking for the folder, and you must have it. Somewhere in the code, a top level images folder is a condition to giving the image option.
Starting in Android studio will give the option, but it's greyed out.
Having the images folder is the magic key that opens the hidden door.