I created a template and successfully created a new blog based on that template.
Everything seems to work fine, but when I go to my media folder the images were not copied over. the original blog was on http://wpmobileapp.com.
Templated Blog image path:
So the templated images are not showing up because they did not copy over not did they retain the original path.
I checked all the boxes except "USERS" when creating the template.