... PNG files are going into /Final Fantasy VII/mods/avalanche/battle/
Then your cfg file need to have modpath = avalanche
This is the most common case. Many of people are using Team Avalanche's mods, so the folder Avalanche is already used by many of us. If you are not using Team Avalanche's mods and don't have the Avalanche folder, then you can give any name to this folder, like you want, but you need to write it on the cfg file like I've said before. But don't forget, under this folder you need to have battle folder (with PNG files inside).