Unfortunately, the confusion with this is pretty much directly caused by the lack of a default user migration template. For most situations, you really want a template that includes the following:
$Documents$
$Pictures$
$Music$
$Video$
$MyDesktop$
This is equivalent to the default inclusions for the stand alone User Migration Wizard, and will work well on both XP and earlier systems, where $Pictures$ and the like are included under $Documents$, and Vista, where they are outside $Documents$.