Got it! I added the image to the program's resources by right-clicking the solution name in the solution explorer -> Properties -> Resources -> Add Resource -> Add Existing file and selecting the picture of the Koala. I changed the code in the XAML to:
ImageSource="Resources/Koala.jpg"
Taking Eric's advice I clicked on Resources in the Solution explorer, and sure enough the picture was there and I was able to change the build action to Resource. After that it worked perfectly, thanks Eric! I'll check your answer as soon as I have enough reputation. I'm fairly new to stack overflow.