Currently when users want to insert an image inside the rich text editor, they will be prompted with the following:

How can I make it so the overwrite box is unchecked on default, and the Destination is automatically pointing to "Documents"?

Hi,

For your first requirement, You can edit the Upload.aspx file in \Program Files\Common Files\Microsoft Shared\web server extensions\15\TEMPLATE\LAYOUTS. Create a backup copy of the files.  Edit all the "Checked" attributes to be "false". But it is not suggested.

For detailed information, refer to the following article:

http://lazysharepointadmin.com/blog/2011/08/25/change-overwrite-existing-files-behavior/

For your second question, Per my test, when we create a new folder, it will display the Destination Folder in the upload form. It is by default that the Destination is automatically pointing to the library and you can change it to a existing folder.

Best Regards,

Lisa Chen